With the recent announcements by Sears, Staples and Radio Shack of huge numbers of national closures of retail stores, it’s time to look at national retail numbers to put the closures in context. Are we at the peak or at the beginning of a major correction in the retail space market?
Every five years, the US Census Bureau completes the Economic Census, a series of business reports that detail the US economy at a level of depth that makes researchers giddy for years. You can find the US Economic Census publication schedule here and see that we are right on the cusp of seeing fresh numbers to replace the 2007 data set.
Until the first of the retail sector reports appear in July, we have to make do with numbers from before the economic crisis of 2008. While there are plenty of data, one thing that jumps out at me is the square feet per capita. In a word, it was huge in 2007.
As reported by Barbara Farfan in retailindustry.about.com:
Many experts believe that 2014 retail store closings are still due in large part to the overgrowth of the U.S. retail industry even before the U.S. Great Recession occurred. According to the 2007 Economic Census, there were 1,122,703 retail establishments in the United States and a total of 14.2 billion square feet of retail space. That means that there is approximately 46.6 square feet of retail space per capita in the U.S., compared to two square feet per capita in India, 1.5 square feet per capita inMexico, 23 square feet per capita in the United Kingdom, 13 square feet per capita in Canada, and 6.5 square feet per capita in Australia.
With the explosive growth of Internet and mobile shopping, the oversaturation of physical retail locations operated by the largest U.S. retail chains becomes even more obvious. Downsizing the size of physical retail stores and the number of retail stores is a significant trend in U.S. retailing and it is a trend that will undoubtedly continue throughout 2014 and beyond.
U.S. consumers are, in a sense, in charge of physical store closings. With their online and mobile shopping behaviors U.S. consumers are casting their vote for which retail store experiences have value and which ones can be easily replaced by their own Internet and mobile counterparts. In response to these strong consumer preference shifts, many large, medium, and small retail chains will be closing physical retail store locations in 2014 because they can’t justify the dwindling sales per square footage results they produce. The era of if-you-build-it-they-will-come retailing seems to have ended for the U.S. retail industry.
With per capita numbers from the last decade looking that extreme, I can barely wait for what the 2014 Economic Census shows – sure to reflect much decline across the Great Recession, but by how much? And how much is yet to come? Stay tuned.