By Tim Hunt
The changing world of retailersUploaded: Apr 28, 2016
The Internet has wrecked the traditional business model for the print media industry, particularly newspapers. That’s not news—online access also is transforming other industries as well.
It’s also disrupted the retail world. Online platforms such as Amazon and EBay, have revolutionized the industry and allow forward-thinking mom-and-pop stores to compete nationally if not internationally. The major retailers also have embraced the Internet, which has resulted in dropping sales per square foot of retail space—the key metric in that industry.
I have read a number of reports in recent days about how major retail chains need to shed locations with lower sales per foot if they are going to regain profitability. For instance, the Wall Street Journal reported on Monday that Sears would need to close 43 percent of its stores to get back to the sales-per-square-foot level of 2006. It’s 31 percent for J.C. Penney and even 25 percent (30 stores) for Nordstrom.
An earlier article described the trends with the headline “get Fancy or Perish.” For getting fancy, look no farther than the major overhaul in downtown Walnut Creek that is taking an already upscale area further up the ritzy level. The San Francisco Bay Premium Outlets in Livermore meet that upscale test with its range of high-profile stores.
The study showed that just 3.5 percent of the malls (the fanciest) accounted for 22 percent of all value. The so-called A-level malls (302 across the country) accounted for 75 percent of the value, while the other 702 malls account for the other 25 percent in value. It pays to cater to the wealthy shopper.
As a result, retailers are leaving malls, changing the strategy of grabbing locations wherever possible to focus on selective malls and to drive online sales. There’s an additional factor—the United States has a glut of retail space (24 square feet per person vs. 15 in Canada and 5 in the Great Britain). And the Internet, when you take out grocery, home improvement and other items not conducive to online sales, the Internet accounts for about 20 percent of retail activity.
Stoneridge attracts an upscale shopper, but has a broader mix of stores with Nordstrom and Macy as well as J.C. Penney and Sears.
One quick personal example: we have large wood-burning stove that heats our family room with the help of a fan that blows the hot air out of vents. The stove is more than 30 years old, yet I was able to find the replacement parts for the fan online from a small hardware store in the South. Without the Internet search, good luck finding those parts.