Retailers, big and small, have been quick to blame declining sales on the rise of e-commerce but according to a new study, the real reason for falling foot traffic at traditional stores lies with a far more familiar competitor: warehouse clubs.
For the National Bureau of Economic Research paper, titled “The Ongoing Evolution of U.S. Retail: A Format Tug-of-War,” the University of Chicago’s Ali Hortaçsu and Chad Syverson studied how the structure of the retail sector has changed in the past 15 to 20 years and found that the likes of Costco, Sam’s Warehouse and Walmart Supercenters have had a greater impact on the landscape than online retailers.
“The growth of the warehouse club and supercenter format has equaled that of e-commerce since 2000 and evidence on the timing, location and market structure changes in retail suggest that the format has in recent years played an even stronger role in shaping the sector than online retail did,” the study said, quoting statistics to back up that claim: Census Bureau data showed sales skyrocketed from $40 billion to $420 billion between 1992 and 2013.
By comparison, e-commerce sales jumped from $35 billion (the category includes mail-order catalogs) to $348 billion in the same period.
“[The warehouse club] segment of the retail sector is just plain large,” the report continued. “Its four largest firms accounted for almost 8 percent of total retail sales in 2012. This is almost 50 percent more than all e-commerce retail sales in that year.”
With that being said, sales growth at these megastores has slowed since 2007, while e-commerce has comfortably rolled along; growing its share of all retail sales from a measly 0.9 percent in 2000 to 6.4 percent in 2014, but ruffling brick-and-mortar’s feathers in the process and forcing everyone to rethink their strategies.
In fact, even with the recent rise of online subscription services such as Trunk Club and Le Tote, clothing and accessories stores only account for 1.4 percent of total e-commerce sales.
“Although online retail will surely continue to be a force shaping the sector going forward and may yet emerge as the dominant mode of commerce in the retail sector, its time for supremacy has not yet arrived,” the reported noted, concluding, “While physical retail is likely to continue evolving in the coming years, it is unlikely to meet its demise soon. At the very least, it suggests the potential for an extensive future role for ‘bricks-and-clicks’ hybrids that combine e-commerce and physical platforms.”