When I read in David Kelnar’s ‘Respect your elders’ and five other powerful trends shaping consumer retail that in the US retailers suffered a 48% decline in shop visits between 2010 and 2013 I did a massive double take.
If that rate of decline has been continuing visits this year will be roughly 75% down on 2010. Physical retail is a high fixed cost business and given that it’s fair to say sales correlate with footfall these levels of decline will put many retailers out of business.
The upshot can only be that the growth of online sales will accelerate. As per the PWC report the main reason that people shop online is for better prices and the more sales that go online the more they online retailers will be able to discount, whilst physical retail is suffering the reverse logic and can only get more expensive. The main reason people shop offline is to be able to see and touch product and to try it on, and those factors aren’t going away. So we’re not looking at the end of physical retail, but we are looking at some pretty dramatic changes.
In most scenarios I’m a fan of creative destruction, but this decline in retail traffic is exceptionally fast and I worry that the adjustment period will be rough, especially for some of the more vulnerable portions of society.