What if something else entirely is occurring? What if many factors are creating an enormous economic shift that we cannot see because we are right in the middle of it? Consider the following: We have been slow to adapt to an ever-increasing set of economic, cultural and technological changes; excepting the young, most of us are not very good at the required adjustments. We increasingly resemble the slowly boiled frog.
The word “revolution” is tossed about too easily, but it is appropriate for the pace and scale of changes we see. We can hardly fathom the long-term ramifications of enormous sociological progressions that have been taking place before our eyes.
Retailers have been having difficulty understanding these changes, much less responding to them. Perhaps the old economic rules of thumb are no longer as useful as they once were. Consider the following five elements as prime drivers of the new “retail misery index”:
- Income: For most of the country, incomes have been flat for the past few decades. The top 10 percent has seen gains, as have the 1 percent – but the biggest gains have come in the top .1 percent. This is reflected in markets like art, mansions and estates, and collectible automobiles. The top .1 percent are not big on malls.
Flat incomes have made the average shopper a much savvier consumer. They are price sensitive, understand how to find bargains, know how to play the stores’ sale game. Even during the usual reckless Christmas shopping season, the American consumer can longer be counted on to blindly buy regardless of price.
- Inflation, Deflation, New Categories: Price changes are a mixed bag. On the one hand, we have seen relentless inflation in housing, education and medical costs — each driven by different factors. The flip side is the ongoing price decreases in so many consumer products, from clothes to electronics, and most especially technology.
However, new product and service categories simply were not in a family’s household budget 10 or 20 years ago: smartphones, Netflix, tablets, data services, Amazon Prime, web hosting, satellite radio, music subscriptions, etc. Even commercial email service is barely 20 years old.
New costs and flat income put household budgets under significant pressure.
These factors all contribute to a downsizing of retail America. But the transformation is much more than total square footage and dollar sale volumes. We are undergoing a fundamental change in how society consumes products. It is happening both too slowly for us to fully grok, and yet too fast for retailers to adapt.
