Attendance at Yankee Stadium is down. Hal Steinbrenner believes that baseball is struggling with a “millennial problem.” Membership at some of America’s finest country clubs is down. Nike has stopped making golf equipment. Adidas just sold its TaylorMade Brand. Golfsmith filed for bankruptcy, and many golf enthusiasts blame “millennials” for the decline. But do retail’s problems really all point to millennials?
As the apparel and footwear industry attempts to satisfy the appetites of fashion consumers, statistics show that the average American will buy eight pairs of shoes and 68 garments this year. However, in-spite of these purchases, retail’s business model depends heavily on the health of the retail environment, and lately something’s been amiss.
Retail stores are closing, selling space is shrinking and we’re wondering whether this is the end of the golden era of the shopping mall. Are we witnessing the birth of a new era—clearly defined by a millennial age group (18 to 34) intent on challenging the retail experience?
When you look at the numbers, it’s easy to think that our economy is doing great: gas prices are down, unemployment is low, GDP growth is up, and consumer sentiment is roaring. America’s economic scenario should be pushing the bar on the quintessential “perfect retail wave.” So why are retailers facing tsunami-like challenges as shoppers forget to show up to stores?
In the first five months of 2017, there have been numerous bankruptcies, store closings, and “going out of business” sales. Apparently, the same people who helped create the retail glut will tell you we have more than 23 square feet of retail space per person in America, as compared to Canada with about 16, and Australia with 11. There is just too much selling space to fill in the U.S., and there are fewer available shoppers to occupy it.
This retail space problem is magnified by the immense amount of square footage that needs to get paired down or re-purposed. At peak, America had roughly 1,500 large enclosed malls. In the past 10 years, new malls have not been built, though some have been renovated, and we’re looking at roughly 1,100 today. When the reduction cycle is complete, we will likely end up with about 1,000 malls—which would be down close to one-third from the glory days. Some estimate that 8,600 stores will close in this calendar year alone. There have been 15 retail bankruptcies this year to date, and more may be on the way.
At this point, the retail optimist would simply ask: what’s doing well, who is shopping, and what are they shopping for? Well, it appears some of those answers are that social experiences are in vogue, dining-out is popular and restaurants are on fire. Travel adventures and spa-resort hotels are bursting at the seams. Trips to Miami and cruises are hard to reserve. Traveling is so popular, that unit sales of luggage are up 20 percent this year. Consumers are simply spending more on themselves and putting less time into store visits.
Certainly, time-saving online retailers like Amazon are flying high, and that can help explain some of the transformation from brick and mortar to cyber. However, the root cause of America’s wandering probably lies elsewhere. The issue lives in our psyche, and is related to the age and thought processes of the millennial buyer who has now come of age, and has the disposable income to prove it.
The story is simply that millennials just don’t have the time, or the attention span, to function the way that the boomers did. Baseball is suddenly deemed to be too slow and boring. Golf is too hard and takes too long. Shopping now requires self-gratification (via social media), and it needs to be instant and convenient.
This new generation of millennial shoppers has simply moved from using its feet (walking the malls) to utilizing its hands (ordering from a hand-held device). It is estimated that 90 percent of millennials do serious shopping (and price comparing) right from their hand-held devices. One click on their phone, and within 24 hours that new sweater seen on Facebook, Snapchat or Instagram shows up at the front door. All this begets the question: why would anyone socialize at the mall, when the mall can go to them?
We will certainly miss Sports Authority, The Limited, BeBe, and Wet Seal as they have closed their doors forever. Some other big names are also trimming significant space, including companies like Radio Shack, Payless, J.C. Penney, BCBG, Sears, Kmart, Staples, CVS, Guess, and Office Depot. Every quarter we hear of new problems and more warnings. Will it end soon? Probably.
Just like everything else related to retail, what goes around comes around, and retailers who started exclusively on the net (like Amazon, Warby Parker, Bonobos), are now opening their own version of brick and mortar. Retail is evolving yet again, and we are witnessing an adjustment from a period defined by real estate overbuilding, to a new era of “shared space” (with online) that combines the changing attitudes and habits of shoppers. Customer experience is simply happening at a much faster pace than physical real estate can accommodate.
The biggest concern with the current retail Armageddon, is not solely about the paring of space, but more tuned to the realization that retail supports 10 percent of the jobs in America, and consumer spending equals two-thirds of our USA GDP. While we don’t want anyone to get the impression that all these closures are warning signals of a pending recession, the term retail “adjustment” is simply a much better phraseology to utilize (while we all work toward redefining the path forward).
At the end of the day, baseball, golf, and retail are not dead. Customers haven’t stopped playing or shopping, but they have changed their personal shopping habits, and retailers are quickly learning to adapt. The current retail tsunami will abate when the playing field levels out, and when brick and mortar morphs with cyber. As soon as that proper balance is reached, the customer segment of our apparel and footwear industry will cleverly settle on the best way to buy their goods.
We will continue to purchase our eight pair of shoes and 68 garments this year. Life goes on.
Rick Helfenbein is president and CEO of the American Apparel & Footwear Association and is a strong advocate for a robust U.S. trade agenda and for “Made in USA.” He lectures frequently about politics and international trade. Follow him on Twitter @rhelfen