What If Retail Traffic Declines Last Forever?
The results keep pouring in and they don’t bode well for brick & mortar retail. Across just about every sector and virtually every time period, traffic to physical stores continues to decline. Of course, for the most part, we aren’t buying less, we are shopping differently. The obvious dominant trend is the explosion of e-commerce, and the one player accounting for the most growth is Amazon. Yet the real news for everyone else is how shoppers are diversifying the channels in which they research purchases and ultimately transact. This so-called “omni-channel” world is wreaking havoc with traditional retailers’ underlying economics and, like most things, the future will not be evenly distributed. The vast majority of retailers have likely entered a period where comparable store traffic will never increase again for any sustained period of time. That’s profound. And more than a bit scary. Drops in store traffic almost always dictate sales declines. Given that physical stores have relatively high fixed costs (rent, inventory, basic staffing, etc.) a material drop in revenue deleverages operating costs and profits fall disproportionately. This long-term (and increasingly widespread) trend is causing a great deleveraging across many retail segments and is the primary reason so many stores are being closed. It’s also causing brands to rethink the size and operating nature of the stores that remain or that they plan to open. These shifts will prove seismic. Read more at Forbes.
