Brick & Mortar Meltdown Pummels These Stores the Most

Brick & Mortar Meltdown Pummels These Stores the Most by Wolf Richter – Wolf Street

Only about half of retail is under attack from e-commerce, but that half is getting crushed.

E-commerce sales in the first quarter soared 16.4% from a year ago to a new record of $123.7 billion (seasonally adjusted), according to the Commerce Department this morning. E-commerce includes sales by online retailers such as Amazon but also by the online operations of brick-and-mortar retailers, such as Walmart, Target, or Macy’s. Over the past five years, e-commerce sales have doubled:

Many observers keep pointing out that e-commerce still accounts for only a small part of total retail sales — in Q1 a new record of 9.3%. And so these observers say the brick-and-mortar meltdown isn’t happening. But it’s not that simple.

There is a bitter reality hidden under these averages: Some retail sectors are getting totally crushed by e-commerce, but others remain largely resistant for now – and this has been borne out by retailer bankruptcies and liquidations over the past three years.

How did brick-and-mortar retail do on its own?

Total retail sales in Q1 – e-commerce and brick-and-mortar combined, but excluding sales at restaurants and bars – increased 5.3% year-over-year to $1.31 trillion.

Retail sales without e-commerce in Q1 rose 3.4% from a year ago.

The “online resistant” bunch: These are brick-and-mortar sectors whose sales have not massively migrated online, for various reasons, including the nature of the product. Most prominently: Gas stations, auto dealers, and grocery and beverage stores. These “online-resistant” sectors combined account for over half of all brick-and-mortar sales. In Q1, their combined sales rose 4.6% to $610 billion.

The “under-attack” bunch: Most of the remaining sectors are under all-out attack from e-commerce. And sales at the “under-attack” sectors edged up only 2.1% in Q4, below the rate of inflation as measured by CPI, even as e-commerce sales surged 16.4%. This chart shows how e-commerce is eating into the share of the brick-and-mortar retailers that are under attack:

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Wolf Richter

In his cynical, tongue-in-cheek manner, he muses on WOLF STREET about economic, business, and financial issues, Wall Street shenanigans, complex entanglements, and other things, debacles, and opportunities that catch his eye in the US, Europe, Japan, and occasionally China. WOLF STREET is the successor to his first platform… TP-Title-7-small-200px …whose ghastly name he finally abandoned in July 2014. Here’s the story on that. Wolf lives in San Francisco. He has over twenty years of C-level operations experience, including turnarounds and a VC-funded startup. He earned his BA and MBA in Texas and his MA in Oklahoma, worked in both states for years, including a decade as General Manager and COO of a large Ford dealership and its subsidiaries. But one day, he quit and went to France for seven weeks to open himself up to new possibilities, which degenerated into a life-altering three-year journey across 100 countries on all continents, much of it overland. And it almost swallowed him up.