Never Mind the Internet. Here’s What’s Killing Malls.

https://www.nytimes.com/2020/02/13/business/not-internet-really-killing-malls.html?referringSource=articleShare&fbclid=IwAR1YnhBtk8O3E5IMsTFcM2S3Bnysm-m9_xXIupykgNzRVOZWYQmXNa6FcLs

By Austan Goolsbee
Published Feb. 13, 2020
Updated Feb. 14, 2020

It has been a tough decade for brick-and-mortar retailers, and matters seem only to be getting worse.

Despite a strong consumer economy, physical retailers closed more than 9,000 stores in 2019 — more than the total in 2018, which surpassed the record of 2017. Already this year, retailers have announced more than 1,200 more intended closings, including 125 Macy’s stores.

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And there is no denying that Amazon and other online retailers have changed consumer behavior radically or that big retailers like Walmart and Target have tried to beef up their own online presence.

But this can be overstated.

To begin with, while e-commerce is growing sharply, it may not be nearly as big as you think. The Census Bureau keeps official track. Online sales have grown tremendously in the last 20 years, rising from $5 billion per quarter to almost $155 billion per quarter. But internet shopping still represents only 11 percent of the entire retail sales total.

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Collectively, three major economic forces have had an even bigger impact on brick-and-mortar retail than the internet has.

In no particular order, here they are:

Big Box Stores: In the United States and elsewhere, we have changed where we shop — away from smaller stores like those in malls and toward stand-alone “Big Box” stores.

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Income Inequality: Rising income inequality has left less of the nation’s money in the hands of the middle class, and the traditional retail stores that cater to them have suffered. The Pew Research Center estimates that since 1970, the share of the nation’s income earned by families in the middle class has fallen from almost two-thirds to around 40 percent. Small wonder, then, that retailers aiming at the ends of the income distribution — high-income people and lower-income people — have accounted for virtually all the revenue growth in retail while stores aimed at the middle have barely grown at all, according to a report by Deloitte.

As the concentration of income at the top rises, overall retail suffers simply because high-income people save a much larger share of their money. The government reports spending for different income levels in the official Consumer Expenditure Survey. In the latest data, people in the top 10 percent of income saved almost a third of their income after taxes. People in the middle of the income distribution spent 100 percent of their income. So as the middle class has been squeezed and more has gone to the top, it has meant higher saving rates overall.

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Services Instead of Things: With every passing decade, Americans have spent proportionately less of income on things and more on services. Stores, malls, and even the mightiest online merchants remain the great sellers of things. Since 1960, we went from spending 5 percent of our income on health to almost 18 percent, government statistics show. We spend more on education, entertainment, business services and all sorts of other products that aren’t sold in traditional retail stores.

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