Creative destruction: Thousands of traditional retailers close as consumers switch to online retailers like Amazon
Traditional retailers have been struggling in the 21st century, and there’s been a steady stream of news highlighting those struggles. For example, J.C. Penney is closing 140 stores this spring, GameStop is closing up to 190 stores, Sears Holding will be closing 150 stores this spring including 108 Kmart and 42 Sears locations in 40 states, electronics and appliance retailer H.H. Gregg has filed for bankruptcy and is closing 88 stores and three distribution centers in 15 states, Macy’s is closing 68 stores, MC Sports is closing 68 stores, Gander Mountain is closing 32 stores, RadioShack is closing 187 stores, and Payless Shoes may file for bankruptcy and close up to 500 stores. And the list goes on….
Based on just the partial list above, store closings for that group of retailers totals to more than 1,400! That retail bloodbath has led some to pose questions like “Is 2017 the death of retail as we know it?” and “With major retailers closing, could this be the end of malls?”
Q: What is the major force behind the retail store closings even as retail sales keep increasing to all-time high levels — reaching a record high of almost $5.5 trillion last year? A shift by consumers from shopping at brick-and-mortar stores to increasingly making their retail purchases online, for greater selection and convenience, and lower prices. The chart above shows that trend graphically. From less than 1% of total retail sales in 2000, online sales accounted for more than 8% of retail sales last year (see light blue bars in the chart), and a new quarterly record high of 9.5% of sales in the fourth quarter of 2016. Measured in dollars, e-commerce retail sales have increased by more than 14 times since the Census Bureau started tracking those figures, from only $27.4 billion in 2000 to nearly $400 billion last year (see dark blue line above).
And the dominant leader in online retail sales is clearly Amazon, which captured an impressive 43% of all online retail sales last year (up from 33% in 2015 and 25% the previous year) and accounted for an amazing 53% of the growth in US e-commerce sales in 2016, according to this Business Insider report. Amazon increased its share of the US online retail market by 10% in 2016, “an incredible accomplishment given that it already controlled such a sizeable chunk of the space,” commented Business Insider. Here’s more from Business Insider (my emphasis):
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Πηγή: American Enterprise Institute
