As I sat eating my Amazon Fresh lunch at my Amazon-supplied office desk, I couldn’t help but pass up an article I came across about the decline of retail. The title? “Yes, Retail is Hurting. No, Don’t (Just) Blame Amazon.” So here we are—in an inevitably shifting consumer world. But, what is to blame on a scale outside of our own buying habits? Is Amazon really the downfall of all retail as we know it, or is there something more? As a general contractor with a specialty in retail construction, our team ponders the same with each unfolding retail bankruptcy story.
Tom Popomaronis of Forbes writes of e-commerce’s expansion and Amazon’s towering growth shaping a large part of our reality as more retailers shutter their doors. There’s no doubt, brick and mortar retail is indeed hurting and e-commerce/Amazon’s success are factors—but there are other areas accountable. In fact, traditional retailer struggle is not new to 2017. Phil Wahba of Fortune affirms that “Retailers have been struggling to keep their heads above water through the entire 2016 year, with companies such as Target, Kohl’s, J.C. Penney, Neiman Marcus and Macy’s all losing market share or having the breaks put on comebacks.” Many also argue that this decline has been in the works for decades.
Consumerism as a whole is drastically different than it once was—now, off-price retailers and dollar stores haven’t been victim to some of the changes other retailers are facing. Buying habits are seeing a transition to different goals in the US—and this is clearly reflected in retail construction activity. The cost of housing is greater than it’s ever been. This and other economic factors have consumers shifting habits to invest in what’s most important to them. Things like home improvements and experiences rank higher than mere “stuff.”
Call it an evolution, for sure, but don’t rule out the retail experience forever. Retailers are acknowledging the apparent shift in consumer needs and closing down excess stores to hone in on the experiential in fewer locations. From a construction perspective, this signals the integration of investments that make it worth shoppers traveling to a storefront. There is still an undeniable value to in-person shopping in several categories. On the extreme end of things, retailers are incorporating concepts like interactive shelfing, technology assisted fitting rooms, and other “smart store” capabilities. While this is far from the norm, the overall direction is a trend is downsizing to enhance a smaller footprint’s built environment.
There is a glaring area I wasn’t previously aware of that’s proving detrimental in the increase in retailer bankruptcies recently: Bankruptcy code changes. What’s now presented is a shorter time for businesses to turn themselves around once they initially file. Now, the law says there is a max of 210 days for retailers to inform building owners if they are going to renew their lease or close. Previously, retailers were golden to be in bankruptcy for periods exceeding 18 months, but those days are long over. Now, liquidation is sometimes the only viable option.
A CNBC article “It’s More Than Amazon” highlights a quote from an attorney who’s represented a large amount of retailers falling under the same category. “When the law changed, it immediately had a very severe effect on the ability of retailers to reorganize” explains Lawrence Gottlieb, a bankruptcy attorney and retail sector expert at New York law firm Cooley. With the cost implications of construction and retail facility upkeep, a stronger investment in fewer stores seems like a wiser position than having to turn around in such a short period with an unmanageable level of capital assets.
Wherever the bout of retail stress lands us, it’s unlikely that retail will die out completely. When you hear sentiments of Amazon and other e-retailers to blame for a decline in physical shopping, this could be partially true, but be mindful that it is only a small glimpse of the big picture. If anything, from a construction viewpoint, the changes ahead show a quality over quantity trade-off.