US holiday shoppers fund a revival for bricksand-mortar stores
Despite a global pandemic, inflation being at a decades-high and supply chain issues around the country, Americans are still shopping this holiday season, and not just online.
Retail sales have been soaring during the pandemic as stimulus payments, a low unemployment rate and savings from spending less on travel and going out have encouraged Americans to buy more things. In November 2021, Americans spent 18% more than they had in November 2020. Experts predicted that this holiday shopping season will be the highest on record.
The increased spending seen over the last year has revived the presence of bricks-and-mortar stores across the country. Once thought to be dying in the shadow of e-commerce’s massive growth, data from this year has shown that more retailers are opening stores than closing them, according to research and advisory firm IHL Group. The firm found that for every retailer that closed a store in 2019, five more are opening stores in 2021.
The data is surprising given the dire outlook for brick-and-mortar stores at the end of 2020, when a record 12,200 stores closed. But many customers still shop in stores: e-commerce makes up just 13% of all retail sales in the US, according to the US Census Bureau, though that number is expected to continue to rise over time.
On Black Friday weekend this year, foot traffic in stores was up by a third compared to last year, though it was still 21% below 2019’s levels. Some malls saw lines of people standing outside of store.
Experts say that while the role that brick-and-mortar stores play for consumers and retailers is changing, this holiday shopping season is highlighting the fact that they are not obsolete.
“The store, the role that it fulfills, is changing,” said Mark Mathews, vicepresident of research development and industry analysis at the National Retail Federation. “It’s not just about the transaction.”
Fewer consumers are using brickand-mortar stores for casual browsing and are instead using it as an extension of their online shopping experience. Curbside pickup, where customers go to stores to pick up a purchase made online, has become popular for customers and is likely to stay, Mathews said. Retailers can now use their stores as fulfillment centers, allowing them to save on shipping and warehouse space.
This year specifically has also seen supply chain issues affecting online retailers: American shoppers saw over 2bn out-of-stock messages online in October, according to Adobe Analytics.
“Consumers feel like they probably need to go pick it up and have it in hand. A lot of folks are really worried that [their items are] not going to get there in time,” said Rod Sides, a vicechair at Deloitte and leader of its US retail and distribution practice.
For retailers, brick-and-mortar stores also serve as a way to expose customers to their brand. Many retailers have found that their online sales increase in the areas where they have bricks-and-mortar stores set up.
When Macy’s announced last month that it will probably delay a batch of closures that it was considering, the company cited the symbiotic relationship between its brickand-mortar stores and its e-commerce business.
“The delayed closure of certain stores allows us to maintain a physical presence in the market, which is critical to our top line growth,” said Macy’s chief financial officer Adrian Mitchell during a call with analysts. “Digital performance is stronger in the markets where we have stores.”
Perhaps the strongest sign that bricks-and-mortar stores will stick around is the fact that many online retailers are opening up stores of their own. Amazon is looking to substantially increase its physical footprint, and other major e-commerce retailers are doing the same.
Store closures are likely to continue in the US, but Sides notes that the amount of retail square footage per capita far exceeds other countries and has for some time.
“We could argue that we were oversaturated,” Sides said, adding that there will probably be an “equilibrium” of online and brick-and-mortar stores that makes sense for retailers and consumers. “You really need to have both.”