It’s mid-January, just ahead of the inauguration, and some big storms are blowing through. Our governor has opened his new administration by declaring a state of emergency. By mid-afternoon there should be an inch of ice covering everything in the area. A bit tough on driving, but overwhelmingly great sledding. Since that isn’t good enough for me, I am on a plane to Minneapolis. The low tonight will be negative 17 degrees. Glad I have my expedition coat along to be sure I survive.
As I have driven through much of the area over the years, I have wondered what that second summer was like for pioneers in Minnesota and much of the upper Midwest. Arriving in late August must have seemed like a farming paradise. But then came winter, and multiple weeks below zero and snow.
Sitting through the long winters must have been a bit stifling. With the next neighbor five miles away, socializing was tough. But then in 18941 came the Sears catalog—a way to see all the possibilities and a method to have them delivered to your door. Remote retailing had its start.
Fast forward over 100 years and today it seems that hardly a conversation goes by without a mention of Amazon. UPS, FedEx and the USPS trucks roll happily full of packages. We all feel the impact, but what are the numbers and where are they going? Scanning the business news headlines over the past few years, we’ve read about the closure of some iconic store brands as Internet companies ate into margins and sales. More closed in the past few weeks after mediocre holiday sales put the final nail in the coffin.
But we respect the numbers, not the feelings, so I went digging.
First up, ecommerce has grown substantially over the past 16 years. As the following graph shows, online sales are now almost 10% of retail sales. Remember that total retail sales includes about 2.6 million retailers nationwide, so it will be a long time before ecommerce is completely dominant.2
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U.S. Bureau of the Census, E-Commerce Retail Sales as a Percent of Total Sales [ECOMPCTSA], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/ECOMPCTSA, January 18, 2017.
What is the impact on those department and other “big-box” stores? As you can see below, once we earnestly began ordering online, it has been a one-way trip for physical locations.
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U.S. Bureau of the Census, Retail Trade: Department Stores (Excluding Leased Departments) [RSDSELD], retrieved from FRED, Federal Reserve Bank of St. Louis;
https://fred.stlouisfed.org/series/RSDSELD, January 24, 2017.
And at least I’ll suggest this has only begun, plus pose the following questions.
- Today it is still a little difficult to cost effectively deliver products to remote and rural areas. Will drone technology or self-driving delivery vehicles change this equation?
- Those 2.6 million retail stores by definition rent or own physical space. What is the future use for strip malls and their larger shopping mall cousins?
- What will be the first successful product entry in true end-user 3D printing?
These are all great things to ponder, and to consider when making your investment plans for 2017 and beyond.