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Grayfields: The Retail Downtrend

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The headline is telling: “ Toys ‘R’ Us Is Prepping to Liquidate Its U.S. Operations.” How could a retailer that first opened its doors in 1948 implode so spectacularly? It’s a manifestation of the “Amazon Factor,” which is turning the retail landscape into a gray graveyard.

The closures are mounting. Business Insider predicts that 3,600 stores in will close in 2018. That is on top of the 6,403 stores that closed in 2017. That year saw such spectacular crash and burns as The Limited closing all its 250 stores. Then there was Macy’s closing 68 stores and Sears and Kmart closing 150. Sports Authority also disappeared, taking 463 Stores with it.

The most dour assessment? The New York Times weighing in with “Department Stores, Once Anchors at Malls, Become Millstones.”

A key parameter of retailing, sales per square foot has fallen precipitously at public retailers from an average of nearly $375 in the early 2000s to around $325 in recent years, reports commercial real estate research firm CoStar, citing U.S. Census, Moody’s Analytics and CoStar Portfolio Strategy data.

Ouch! What’s driving this trend? Three phenomena:

  • Digital Lifestyle Ubertrend – The Digital Lifestyle Ubertrend is reshaping shopping habits, with the Amazon Factor clearly at play here. has reportedly signed up some 90 million U.S. Prime members — without a doubt a vast majority of America’s top buyers.

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  • Time Compression Ubertrend – Not only is it more convenient to shop online; it requires fewer resources. Shoppers save on gas or public transportation and, as BusinessWeek observed in May 2005, “The typical one-hour trip to the mall costs about $30 at the average hourly pay for managers and professionals.” Then there is the Time Compression Ubertrend, which is making everyone crazy busy.
  • Their worst enemy — The retail industry’s wounds are partially self-inflicted. Capgemini reported in January that “a third of consumers would rather ‘wash the dishes’ than shop in-store.” While that means that two-thirds are still OK with shopping in brick-and-mortar stores, the question is for how long? USA Today reports that millennials are killing department stores, noting that traditional retail is ill-equipped to address the needs of this generation.

Another issue is that for years now, retailers and analysts have fixated on the large gap between U.S. retail sales, which were projected to reach $5 trillion in 2016, and “puny” U.S. e-commerce sales of $395 billion (PDF).

The fact is that those 66 million Prime customers constitute the lion share of foot traffic and sales at traditional retailers. Absent frequent buyers, retailers are collapsing, abandoning shopping malls, whose gray, hulking masses are fueling a trend dubbed “grayfields.”

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