Industry Changes

A friend of ours was talking about the empty big box stores flooding the city and of course other parts of the US.  He asked the question that many are asking “who is going to fill those spaces”?

People still leave their homes to shop and explore but many times the items that they end up purchasing don’t come home in a shopping bag but are delivered by UPS during the week to their front door.  What kind of experiences that make money will draw people to stores?

I have long thought about shopping experiences that draw me in.  They are either highly curated stores that I can discover such as Colette (sadly closed) or The Story (recently sold to Macy’s).  Others that I shop in carry exactly what I want and I have a relationship with them.  These all have intimate settings.  Will there be stores that carry everything for the family including art, classes, restaurants and a concierge to fill those big spaces?  Maybe but not enough to fill all those empty storefronts.

Bottom line is retailers have to make enough of a profit to rent the spaces and bring home some cash otherwise it doesn’t work.  Eventually, rents will come down as supply-demand is the backbone of all economies.  Over time, new brands and new thought leaders will be the face of these empty storefronts with new concepts.

Technology has touched every industry.  People still long for getting out of their homes, socializing through experiences and that includes going to a museum, seeing a movie or shopping.  That isn’t going to change.  What is going to change is how we shop, where we shop and what the experience is going to be like.  It will change the number of jobs needed to run these new shops, the rent, the lease, what is sold and the entire experience.  That is the long tail of e-commerce as much as it is changing for a new generation.

Comments (Archived):

  1. awaldstein

    Great to think about, hard to draw conclusions.When I think about interesting successful retail brands, like Mott & Bow, Allbirds, Away, even now Peletron, while all different from each other, these are all simply retail brands with a back bone online that are strong enough to pop up everywhere, for periods of time and be successful on the street.This model simply works.Replumping older brands we may love. Rebuilding the back bones of brands grounded not in the clarity of branding and efficiency of logistics, a different story altogether.

    1. Gotham Gal

      And those new brands look successful but have yet to have an exit so will be interesting to see where they end up.

      1. Arnold Waldstein

        Quite true. The financials behind Peletron are crazy with almost $1b raised.

  2. Tracey Jackson

    There is a whole other part of this conversation,which is not just how companies perform, which as an investor I know what interests you as well as the shopping experience, which I love as much as you do. And the new brands, the Allbirds, Everlayne, Glossier and the others that have managed to cross over with a store in a few big cities – but the day to day purchases, that you might not want to wait the 24 hours for Prime to deliver are often very hard to find. Try and find a good selection of birthday cards and wrapping paper. There is only one or two really good light bulb stores left in NYC. Spur of the moment odd battery sizes, most anything you can find in a hardware store. A showercurtain. It’s really so odd to experience life where in a city like NYC it’s harder and harder to find the small items we use to live our daily lives.Out here it’s easier, we have a hardware store and even – imagine – a five and dime. People still need things that are not trendy or cool, and there was once a store or two in most neighborhoods to fill those needs. On the UES there are two hardware stores, twenty blocks apart and a Home Depot. That’s insane with over a hundred empty store fronts. I worry about that part of the story!

    1. Gotham Gal

      I hear you. I do think there will be new ones that fill those needs. Maybe the mail places. We are in a lull. A few years from now we will be in a different spot. I do believe that

  3. CCjudy

    I was just in store in SFrancisco – large space with “old” things for offices for businesses – people working there putting things on shelves yet nobody buying. they have added home cleaning products. I was thinking of arranging chairs on Titanic

    1. Gotham Gal

      Nice analogy

  4. Pointsandfigures

    Rents come down to a point. Fixed costs of running a building combined with the high government costs (Taxes, inspections, regulations, mandates) of operating it put a floor in. We have a shop by our lake place, Small town. He tries to develop a relationship with customers and has a pretty good Instagram game. One thing the web has done is given a shop like his the ability to get noticed and compete. It can enable local artisans as well.In other industries, wrote stuff gets commoditized and eventually finds its way to algorithms or AI. I could see that happening with normal shopping. That means the big box grocers/stores will have to act less like warehouses and figure out new ways to connect to customers. The web can create customer relationships that weren’t possible before.When I walk into a store like Macy’s, I don’t think they are thinking that way.

  5. JLM

    .”Who is going to fill those spaces?”The answer in many suburban locales is the local community college and county government.Total retail sales is a fairly finite number except for the wealthy, who do not have the same constraints on their spending. They are buying luxury goods, not commodities. They use the same amount of toilet paper as the middle class, but a lot more expensive doo dah.As retail sales emigrate to Internet real estate, the bricks & sticks component of that retail sales flow will diminish.Real estate is 7-10% of gross revenue to a bricks & sticks retailer. If sales go down, the ability to support the physical plant goes with it.This is a trend just like the advent of shopping malls. In this case, the trend is not the bricks & sticks retailers friend.Take a look at the mattress industry where Mattress Firm is on the verge of bankruptcy – not financial bankruptcy, but real estate bankruptcy, too many unproductive stores. Meanwhile, all the new mattress Internet startups are selling like crazy. (They cannot all survive BTW.)A fairly constant market for mattresses is being redistributed from the bricks & sticks retailers to the Internet. Hello, America.JLMwww.themusingsofthebigredca…

  6. P Donohue

    The rate of technological change is geometric in its progression and we are now at the knee of its power curve.