It doesn’t seem that long ago when there was something new called e-commerce, where people could buy products online on the internet. The first “Black Friday” left consumers skeptical of how this infant marketplace would work. Most concerning was not really buying a product without actually seeing or touching it, like shoes, but the fact that one had to give up financial information in order to complete the transaction. While once again such innovation did not take place in China or communist Russia, it was in entrepreneurial America that begin to solve security and other issues facing a potential multi-billion dollar market.
Fast-forward to today. If you are a millennial, you know nothing of what was said in the first paragraph here. Your smartphone has come to dominate your social and shopping experiences. Remember the time when it was absolutely necessary to have a brick and mortar building on the corner of your town. I guess it should be no surprise to anyone that retail store closures set a U.S. record in 2017, with more than 105 million square feet closing shop. At the current pace, such record looks to be broken in 2018.
With Amazon sales up over 50% this year, it looks like the verdict is in on retail. High profile bankruptcies like Toys-R-Us highlight the year 2017, where there were more than 662 retail filings for bankruptcy in the U.S., up some 30% from last year, according to Bankruptcy.Data.com
Take Charleston, SC for example. It would appear that business is booming, with construction cranes dotting the skyline, people moving to the area in droves, and house prices climbing. However a study ranks Charleston the No. 1 worst place in the U.S. to start a small business. While Charleston leads the list, this is not unique throughout the country. New York-based RewardExpert, a two-year-old start-up firm itself, studied 177 metropolitan areas across the U.S. with populations above 250,000. Among other things, the research firm noted that launching a small business is no small feat and just one-third of all establishments nationwide survive 10 years or longer. I think entrepreneurs inherently know this, but such data does little to deter them from their dreams.
Analysts are predicting another dismal year for retail, with as many as 8,600 brick and mortar stores to be closing in the upcoming year, according to Credit Suisse in an April research report. However, all is not gloom and doom, according to Tom McGee, CEO of the International Council of Shopping Centers, a trade group of mall owners. “There are always going to be winners and losers in an industry like this. It’s constantly in a state of flux. The whole image of the demise of traditional retailing is overblown.” According to the likes of McGee, retailing is always going through a metamorphosis, with e-commerce and online shopping being the latest in the changing environment.
Ron Friedman, a retail expert and partner at Marcum LLP, brings up an interesting dichotomy between not only tradition C2B business competition, but also B2B competition. “Home Depot is a place where you can go and ask questions, like Best Buy.” What was once, and still probably is, a battle of customer service between the big box retailers like Home Depot and the more traditional hardware stores like Ace or True Value. Let’s face it, Ace has better customer service than Lowe’s. Now, how about online whale Amazon. If you think you needed help figuring out the difference between screwdrivers retail, you will get even less help from Amazon. And by the way, it’s just gotten twice as expensive to use the beloved Amazon Prime.