This is a topic that gained attention about 7 years ago. Since that time, the news coveraged ebb and flowed. Nevertheless, the reality is that we are seeing some consistency in this segment.
And for those involved, it is not good news.
For those who were living on a planet far away, the term retail apocalypse applies to the idea that physical retail stores were getting crushed. Due to the switch to online shopping, Amazon in particular, we saw less foot traffic through physical retail stores. This is something that ended up hurting sales, resulting in many store closings.
Some large brands got caught up in this. Names such as Sears, KMart, TJMax, Radio Shack, and Payless all found themselves facing varying degrees of trouble. Some on the list are no longer in business while others are hanging on by a thread.
Unfortunately, life did not get any better with the start of the new decades. The introduction of COVID lockdowns sent many companies into bankruptcy. Here again, physical retail was affected. While the likes of Amazon cleaned up with their online sales, the rest of the industry was sucking wind.
The Destruction Continues
It is now almost 3 years since the carnage from COVID in the US started. Time has not healed a great deal. Now we are confronted with the possibility of a recession, another hit that could wipe out a lot of stores.
As these words are written, it is heading into Black Friday. This is where the holiday shopping season kicks off. Retailers are desperate to make their sales during this period since it accounts for a large percentage of their profits.
With the shape of many retailers, a bad season could mean filing paperwork come January or February.
A couple weeks back, the largest retailer, Walmart, announced their earnings. They had a strong 3rd quarter which many took to be a positive sign. It is not. The reality is that company, as the largest grocery chain, is going to fare better when times are difficult. When people "step down", they move from the likes of Target. That company, reported a poor quarter, something that does not bode well for the end of the year.
Recession is only going to further erode the stability of chains such as Walgreens and CVS. The pharmacies became low end retailers as their prescription business encountered a host of competitors. Everything from the aforementioned Walmart to medical chains started to offer these to customers. This eroded much of the foot traffic in the traditional pharmacies.
A reality that all these entities are facing is that the digital world is only going to keep expanding. This means that online ordering is going to keep eating up a larger portion of purchases made. Since most of these companies failed to establish a digital presence, they are likely heading out of business.
Automobile Business
The other day we wrote about Mass Bankruptcies in Car Dealerships Coming. This is a continuation of the same idea here.
Tesla sells 100% of its vehicles online. The same is true for other electric vehicles start ups. This year, Tesla will sell more than 1.3 million vehicles, all of them done without the use of a car dealership. That is a lot of revenue sucked out of that segment of the market.
It is a trend that is only expected to continue.
Why are cars any different than other products? Historically we treated them as such but times are changing. The idea is they eventually become computers on wheels. This means that, since we buy computers online, cars could follow across the board.
We also have the ongoing assault on banks. For those in cryptocurrency, the threat posed is well known. However, this goes far beyond crypto and blockchain. FinTech has been doing a number on the banks for close to two decades.
Now, we are seeing branch closures occurring at an accelerating pace. Banks simply no longer require all those people since most of the transactions are done online.
Shopping malls, retail establishments, automobile dealerships, and banks are all facing the same future: a lot of closures.
This means there is going to be a lot of commercial real estate available, especially in the United States, which has the most retail space per capita of any country in the world.
The apocalypse continues. In fact, it is only spreading.
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