Interesting column in the New York Times by Austan Goolsbee, a professor of economics at the University of Chicago’s Booth School of Business as well as chairman of the Council of Economic Advisers during the Obama administration, in which he talks about it is misguided to chalk up mall retailers' problems to e-commerce.
He cites four reason why:
First, "while e-commerce is growing sharply, it may not be nearly as big as you think. The Census Bureau keeps official track. Online sales have grown tremendously in the last 20 years, rising from $5 billion per quarter to almost $155 billion per quarter. But Internet shopping still represents only 11 percent of the entire retail sales total."
Furthermore, he writes, "more than 70 percent of retail spending in the United States is in categories that have had slow encroachment from the Internet, either because of the nature of the product or because of laws or regulations that govern distribution."
Second, Goolsbee argues that while e-commerce has been a competitive challenge for many bricks-and-mortar stores, big box stores have been and continue to be a bigger threat. "The rise of warehouse clubs and supercenters was bigger than the rise of online commerce," he says.
Third, income inequality: "Rising income inequality has left less of the nation’s money in the hands of the middle class, and the traditional retail stores that cater to them have suffered," he writes.
And finally, there is the inescapable fact that "with every passing decade, Americans have spent proportionately less of income on things and more on services." The problem is, "Stores, malls, and even the mightiest online merchants remain the great sellers of things."
Goolsbee concludes that "the broad forces hitting retail are more a lesson in economics than in the power of disruptive technology. It’s a lesson all retailers will have to learn someday — even the mighty Amazon."
- KC's View:
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I think the one thing that Goolsbee doesn't take into account, perhaps because it is outside his expertise, is that a lot of these retailers did not do what they needed to do in order to compete. ("Compete is a verb." Remember?)
But it also may be that economic forces and realities are too overwhelming, and that it doesn't matter what you do. Though I tend to think it always can matter.
