Brick & Mortar Meltdown Pummels These Stores the Most, by Wolf Richter

Many brick and mortar stores are getting killed by e-commerce. From Wolf Richter at wolfstreet.com:

Only about half of retail is under attack from e-commerce, but that half is getting crushed.

E-commerce sales in the first quarter soared 16.4% from a year ago to a new record of $123.7 billion (seasonally adjusted), according to the Commerce Department this morning. E-commerce includes sales by online retailers such as Amazon but also by the online operations of brick-and-mortar retailers, such as Walmart, Target, or Macy’s. Over the past five years, e-commerce sales have doubled:

Many observers keep pointing out that e-commerce still accounts for only a small part of total retail sales — in Q1 a new record of 9.3%. And so these observers say the brick-and-mortar meltdown isn’t happening. But it’s not that simple.

There is a bitter reality hidden under these averages: Some retail sectors are getting totally crushed by e-commerce, but others remain largely resistant for now – and this has been borne out by retailer bankruptcies and liquidations over the past three years.

How did brick-and-mortar retail do on its own?

Total retail sales in Q1 – e-commerce and brick-and-mortar combined, but excluding sales at restaurants and bars – increased 5.3% year-over-year to $1.31 trillion.

Retail sales without e-commerce in Q1 rose 3.4% from a year ago.

The “online resistant” bunch: These are brick-and-mortar sectors whose sales have not massively migrated online, for various reasons, including the nature of the product. Most prominently: Gas stations, auto dealers, and grocery and beverage stores. These “online-resistant” sectors combined account for over half of all brick-and-mortar sales. In Q1, their combined sales rose 4.6% to $610 billion.

The “under-attack” bunch: Most of the remaining sectors are under all-out attack from e-commerce. And sales at the “under-attack” sectors edged up only 2.1% in Q4, below the rate of inflation as measured by CPI, even as e-commerce sales surged 16.4%. This chart shows how e-commerce is eating into the share of the brick-and-mortar retailers that are under attack:

But even that chart averages out the meltdown in specific sectors. Some brick-and-mortar sectors have already been largely wiped out, such as music stores and video stores. Others have been decimated by e-commerce, such as sales at book stores and toy stores, including Toys “R” Us which is currently being liquidated.

To continue reading: Brick & Mortar Meltdown Pummels These Stores the Most

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One response to “Brick & Mortar Meltdown Pummels These Stores the Most, by Wolf Richter

  1. Been there, done that. Mega stores were supposed to destroy everything, they didn’t. Department stores were supposed to wipe out mom and pop stores, they didn’t. Technology changes everything. Most products can’t or shouldn’t be purchased online.

    Like

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