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We’re In the Midst of a Retail Collapse


— April 27, 2017
A Sears store in a mall.

When the mining and manufacturing jobs that supported a strong middle class went overseas or were automated away, they told us not to worry. Not only would these changes make widgets cheaper for people with lower incomes (like most of us were destined to become), we were just transitioning into a service economy, and new jobs would be easy to find as long as we were ready to retrain and think outside the box. As it turns out, we’re going to have to think outside the Big Box (stores, that is) since now, even those lower wage jobs are disappearing in a retail collapse.


When so many of the mining and manufacturing jobs that supported a strong middle class went overseas or were automated away, they told us not to worry. Not only would these changes make widgets cheaper for people with lower incomes (like most of us were destined to become), we were just transitioning into a service economy, and new jobs would be easy to find as long as we were ready to retrain and think outside the box. As it turns out, we’re going to have to think outside the Big Box (stores, that is) since now, even those lower wage jobs are disappearing in a retail collapse.

Why is this happening? It’s arguable that we’ve been “over-retailed” for a while. On one hand, competition between large chains meant that in order to survive, retailers had to either undercut each other on prices or appeal to niche markets by stocking unusual items that might not sell like hotcakes, but which people can’t get anywhere else: the long tail of retail. On the other hand, once people learned that online sellers could provide a vast number of niche items, often at prices cheaper than brick and mortar stores could afford to charge, both of these strategies faltered. Even as we complain about watching the market for retail collapse around us, we sure love the convenience of Amazon, don’t we? It’s all connected.

A JC Penney store set to close: another victim of the retail collapse.
JCPenney is one of the multitude of big name American chains falling victim to the retail collapse. Photo by Mike Kalasnik, via Flickr. CC BY-SA 2.0

There’s also a downward economic spiral going on. When communities lose jobs, those families can’t afford to spend as much, so businesses that support those communities also suffer. (It’s the reverse of the Multiplier Effect.) When the new jobs that these displaced workers find in a changing economy are too unsuitable or pay so little that they can’t afford to buy much, that also contributes to retail collapse. Contrarily, this is also the argument offered by those who advocate for the lowest possible minimum wage, looking at the spiral in the other direction. To them, workers accepting everyday low wages allows stores to survive by attracting bargain-sensitive shoppers in a competitive market where high labor costs can make or break a business. Either way, when one point in the cycle breaks, it’s downhill from there.

As people turn to online shopping in lieu of supporting their local economies, there’s another insidious process that benefits from our (more or less) collective choice to let brick and mortar retail collapse. When you go into a physical store, you can look at the prices the business is charging and decide whether to take it or leave it. Haggling went out of fashion in American stores around the time of the Civil War. When the explosion of Big Data converged with a massive pivot to online shopping, though, it gave businesses an unprecedented ability to pinpoint exactly how to reel customers in for maximal profit, whether it’s by figuring out what time of day most customers are likeliest to spend freely, or even the highest price any given individual would willingly pay for an item before walking (or clicking) away. Prices become less about the resources that went into making an item (plus a reasonable profit), and more about how much they can take you for.

In the end, whether we voluntarily take part in our own manipulation by shopping online or whether we tighten our belts and learn to want and need less so we can afford to live on the lowest wages that employers are inclined to offer, the retail collapse represents a consolidation of power for the businesses that survive. It’s hard to defend the idea that we needed as many stores selling as many widgets as we entered the decade supporting. It’s also hard to watch my fellow Americans give businesses so much power over the way we earn and spend our money. It is, after all, what we trade the limited, precious hours of our life to get.

Related: A Middle Class Tragedy of the Commons

Sources:

Stores are closing at an epic pace

Retail cuts tens of thousands of jobs; sector undermined by overbuilding, then savaged by Net shopping

America is ‘over-stored’ and Payless ShoeSource is the latest victim

What in the World Is Causing the Retail Meltdown of 2017?

The Long Tail of Inventory and Why It’s Important

Retail Is Not In As Much Trouble As People Think, Fears About The Sector Are Overblown

How Online Shopping Makes Suckers of Us All

These major retailers are closing more than 3,000 stores this year

The Walmart Tax Every American Taxpayer Pays

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