A re­tail apoc­a­lypse?

Fu­ture changes not nec­es­sar­ily bad for com­mu­ni­ties

Northwest Arkansas Democrat-Gazette - - VOICES - NOAH SMITH

As tech­nol­ogy changes, a coun­try’s in­dus­trial mix changes. A cen­tury and a half ago, most Amer­i­cans — and in­deed, most hu­man be­ings — worked on farms. To­day al­most no­body does. Nowa­days, a sub­stan­tial num­ber of Amer­i­cans work in re­tail, ring­ing up pur­chases, stock­ing shelves or help­ing cus­tomers find what they need. But in a decade or two, it’s any­one’s guess as to whether brick-and-mor­tar re­tail will con­tinue to dom­i­nate the ur­ban, in­dus­trial and oc­cu­pa­tional land­scape of the U.S.

Early signs point to “no.” The rise of e-com­merce con­tin­ues un­abated. Mean­while, re­tail jobs are be­com­ing rarer, with a fall­ing share of the pop­u­la­tion work­ing in the in­dus­try.

The de­cline of phys­i­cal re­tail has re­ceived a lot of at­ten­tion re­cently. A wave of store clo­sures and bank­rupt­cies this year was de­scribed as a “re­tail apoc­a­lypse” in an April story in the At­lantic, “What in the World Is Caus­ing the Re­tail Melt­down of 2017?”:

“There have been nine re­tail bank­rupt­cies in 2017-as many as all of 2016. J.C. Pen­ney, Ra­dioShack, Macy’s, and Sears have each an­nounced more than 100 store clo­sures. Sports Author­ity has liq­ui­dated, and Pay­less has filed for bank­ruptcy. Last week, sev­eral ap­parel com­pa­nies’ stocks hit new multi-year lows, in­clud­ing Lu­l­ule­mon, Ur­ban Out­fit­ters, and Amer­i­can Ea­gle.”

Nat­u­rally, many peo­ple are wor­ried that e-com­merce is com­ing for their jobs. Given that it’s of­ten dif­fi­cult for work­ers to tran­si­tion to new lines of work, this is a per­fectly valid fear. But in the case of re­tail, I’m not that wor­ried. Un­like man­u­fac­tur­ing, where over­seas com­pe­ti­tion in the ’00s de­railed many Amer­i­cans’ ca­reers, re­tail doesn’t in­volve that many spe­cial­ized skills. Usu­ally it’s just man­ag­ing peo­ple, talk­ing to cus­tomers and do­ing rou­tine work. Those are the kinds of skills that will trans­fer to other jobs. In other words, it doesn’t seem likely that out-of­work cashiers and store sales­peo­ple will be cast into lower-pay­ing jobs or onto the wel­fare rolls for the rest of their lives. They can go into health care, food ser­vice or a va­ri­ety of dif­fer­ent ser­vice jobs at com­pa­nies in many in­dus­tries.

But the end of brick-and-mor­tar re­tail is cer­tainly a con­cern, for a very dif­fer­ent rea­son. Mod­ern U.S. cities, es­pe­cially the sub­urbs, are built around re­tail stores. If those stores evap­o­rate into Ama­zon.com Inc.’s cloud servers, huge gap­ing holes will open up in the eco­nomic land­scape of al­most ev­ery sub­urb and town in the U.S.

Think of any subur­ban area you know. It con­sists mainly of houses, some apart­ment com­plexes, low-rise of­fices and strip-mall shop­ping cen­ters filled with re­tail and restau­rants. Now imag­ine if half the stores van­ished, leav­ing large sec­tions of ev­ery strip mall boarded up. First of all, the restau­rants and bars that re­mained in the shop­ping cen­ters would lose a lot of their cus­tomers. As of now, many peo­ple drive to shop­ping cen­ters so they can do their eat­ing and re­tail shop­ping in one place — with re­tail gone, the fixed costs of driv­ing to the lo­cal strip mall are the same, but the ben­e­fit is much lower. That would hit the bot­tom line of food and drink es­tab­lish­ments.

Even worse, the empty, semi-aban­doned strip malls could be­come cen­ters of subur­ban blight. Va­cant prop­er­ties draw drugs and crime, cause fires, in­crease lo­cal vi­o­lence and re­duce prop­erty val­ues in the sur­round­ing ar­eas. The re­tail apoc­a­lypse could make many sub­urbs look like they just suf­fered an ac­tual apoc­a­lypse.

The de­cline of phys­i­cal re­tail will thus force the U.S. to re­think its en­tire idea of what a city is for. Why do peo­ple live near each other, if not to shop at the same places?

One rea­son is to go out to eat. Even as re­tail has de­clined, restau­rants and bars have been do­ing more busi­ness. An­other rea­son for peo­ple to clus­ter is to take ad­van­tage of schools, day-care fa­cil­i­ties, hos­pi­tals and other lo­cal ser­vices. That’s not go­ing away in the age of Ama­zon — peo­ple like liv­ing near their friends and meet­ing new peo­ple in per­son.

So even if phys­i­cal re­tail dwin­dles, ur­ban and subur­ban liv­ing will not van­ish. It will just change. Towns and cities across the coun­try will have to con­sol­i­date into a more com­pact form, to elim­i­nate the gaps left by van­ish­ing re­tail­ers — in other words, sprawl will have to be re­duced. Strip malls will still ex­ist, but they’ll be fewer in num­ber. And pref­er­ence for pedes­trian-friendly streets will prob­a­bly in­crease, since walk­ing around is nicer when go­ing out to eat than when buy­ing a new vac­uum cleaner.

Re­build­ing the sub­urbs will mean a lot of spend­ing at the lo­cal and state level. But per­haps that’s not such a bad thing. Work­ing-class Amer­i­cans need jobs, and this sort of epic con­struc­tion project would cre­ate a lot of them. If the re­tail apoc­a­lypse leads to a subur­ban re­nais­sance, maybe it’s some­thing to be rel­ished rather than feared.

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Noah Smith is a Bloomberg View colum­nist and was an as­sis­tant pro­fes­sor of fi­nance at Stony Brook Univer­sity.

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