The P.A.

A weekly address from Patrick Adams,
President of St. Louis Community Credit Union

The United States of Amazon

On August 29th, 2016, posted in: Uncategorized by

package on front porchMy son played the role of canary in the coal mine many, many years back. Long before USA stood for the United States of Amazon, the kid was onto something. He smelled the deadly gases. (Remember, in days past, miners would carry caged canaries into the mine, and if low-level toxic gases were evident, the canary would die, giving miners warning that they should turn around.)

Well, my brilliant lad foresaw problems in the world of retail. He said something like, “Why in the heck would anyone go shopping when they can sit at home, order what they want and have it on their front porch the next day?” Today, such a prediction would gain you the title of Captain Obvious, but five or so years ago, to make such a call was heresy. His prescient view of the changing world of retail was right on the mark. He put his money where his mouth was, and his online selling company has grown ever since.

In St. Louis, the latest mall to become an afterthought is Chesterfield. Macy’s has announced that 100 stores across the country will close, not yet telling us where. If you’ve paid close attention, even Walmart has closed 269 stores earlier this year, investing big in their digital solutions by acquiring a company called Jet. Target’s a mess. Foot traffic in the stores is the biggest issue facing them. Other stores in trouble include Gap, Kohl’s, Nordstrom and JCPenney. 44,000 retail jobs have disappeared in 2016. Yep, my boy called it.

Very telling is that when Sports Authority filed bankruptcy just a few months ago, no other retailer bid on their assets. Pennies on the dollar, and nobody wants the inventory. If you can’t sell it, why buy it?

Extraordinary growth at Amazon (19%) has kept overall retail sales barely positive at an anemic 1%. Do the math. People don’t even need to try things on any more. Amazon is on the verge of being the number one retailer of clothing. I get it. I wanted a new tuxedo jacket to “young up” my look. Bingo. Customized and delivered to my door (46 X-long) for about $85. The jacket is a magnet for compliments.

Pair an economy that is sluggish on retail  with a paradigm shift in purchase patterns, and we’ve got the makings of a really ugly pattern of empty strip malls, closing mega malls, and main street “mom and pops” huffing and puffing to survive. Bleak is a word that comes to mind. This Christmas season will play a key role for many retailers.

I’ll try my hand at being prescient. If retailers want to survive on the street, they better figure out how to become “Amazon-proof.” The value will come by selling something that requires technical training or that has to be touched, smelled or applied prior to purchase. Only then will retailers make it.

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