New reports from Credit Suisse predict that up to 25 percent of U.S. shopping malls will close in the next five years, and more than 8,600 stores will close this year alone. Locally, Genesee County has lost — or will be losing — MC Sports in Grand Blanc, Kmart in Fenton and Gander Mountain in Flint Township, to name a few.
While several factors play into these closures, one of the main culprits is the Internet, says Mark Perry, professor of economics and finance at the School of Management at the University of Michigan – Flint.
“The retail sector is going through a significant shift toward online purchases,” Perry said. “Last year, online sales accounted for more than 8 percent of retail sales. That’s up from less than 1 percent in 2001.”
And considering that approximately 80 million households — or two thirds of all American homes — have an Amazon Prime membership today, it’s safe to say that the e-commerce won’t be slowing down any time soon.
Wondering what that means for the region and beyond? Perry answers this and more below.
You’ve referred to this shift in the retail space as a form of “creative destruction.” What does this mean?
Flint, Michigan was a great example of this 100 years ago. There was a new product — the automobile — that created a huge market that disrupted the horse and buggy manufacturers. It displaced some industries but created a whole new industry in the process.
I don’t know if this is going to be that disruptive, but the Amazon model is disrupting the retail sector. But in a good way for consumers.
How so?
All of this intense retail competition breeds competence. Since Amazon is the leader, now everybody else is disciplined by Amazon’s efficiency and low prices. And it’s not just low prices. It’s same-day delivery, it’s unlimited inventory. It’s creating an intensely competitive market where consumers are getting maximum value.
How is this impacting jobs?
Nationally, we’ve seen a decline in retail employment. In 2001, department stores employed 1.8 million people. As of April 2017, it was below 1.3 million. The retail trade in general doesn’t look so bad. When you include restaurants and discount stores, employment has been pretty stable at 16 million jobs.
Retail is the second largest industry in Genesee County, representing about 15 percent of the county’s employment. Should we be concerned?
This is happening gradually enough that people will be able to adjust. Some of the national chains might be under stress for a while, but this will create jobs in other sectors. The products have to be delivered, so there’s going to be a market there for shipping.
And if people are saving money based on purchasing things online, that will allow them to spend more on local restaurants, movies and entertainment. That’s going to support additional jobs there as well.
Do you foresee a future without brick-and-mortar stores?
This is consumer driven, and it’s hard to guess what consumers are going to want five or 10 years from now. The trends we’re seeing now probably aren’t going to reverse anytime soon, so it’s going to be a continual shift toward online shopping. But there are always going to be people who want to see it and feel it and try it on before they buy. There are always going to be people who go to the grocery store or want to look at the grills at Home Depot.