The Changing Nature Of Retail – Economic Implications

On Wednesday, June 8, The Wall Street Journal had a story titled “Faded Malls Leave Cities In the Lurch.”

Some notable excerpts:

Sales taxes are a critical source of funding for many cities, typically second in size only to property taxes. They accounted for roughly 23% of all U.S. state and local tax collection in 2008, the latest year available, according to the Census Bureau.


While the number of Americans grew 52% from 1970 to 2010, the amount of store space jumped 126% according to real-estate research firm CoStar Group Inc., which estimates the country has 50 square feet of retail per person.

Now the growth of online shopping, which has accelerated since the recession, is leading many retail chains to slow store openings and invest instead in better websites and mobile-phone applications, reducing the demand for real estate.

My comments:

The changing retail landscape, and the accompanying economic ramifications, is something that lacks full recognition.

The article quoted above focuses on the aspect of lower tax revenues as “bricks and mortar” stores are continually pressured from a variety of sources.

The pressure being exhibited on retail stores has other widespread economic ramifications.  Store closings also impacts employment, commercial real estate, and impairs economic development, among other things.  Closed retail stores can also contribute to “urban blight”, as closed stores and “ghost malls” often sit for long periods of time.  These closed stores can serve as a haunting reminder that “all is not well” economically.

Needless to say, retail is a very prominent aspect of our economy; its continual changes, especially over the last two decades, have had a very notable impact on the economy.

Various large retailers – those that have massive stores – have recently announced plans to build smaller stores in the future.  It should be interesting to see how these efforts fare.


The Special Note summarizes my overall thoughts about our economic situation

SPX at 1270.98 as this post is written