That Makes Me Stabby: Over-Reliance on Retail Sales Growth

Each day, we hear the dire reports that people have closed their wallets, retail sales are down, and stores are closing. Could it be that the problem isn’t negative retail sales growth, but excessive store growth? I tackle that topic in today’s That Makes Me Stabby.

Happy Times at Some Malls?

This Sunday I went to a local outdoor mall to meet a friend for coffee. I was surprised to see that it was packed at around 11 AM. I probably shouldn’t have been: it was about 75 degrees outside, the mall is well-landscaped, and it’s in an affluent area. Not one store was out of business and the restaurants were all packed. I didn’t see as many shopping bags as usual, but there were some.

That started me thinking: why are some areas seeing multiple store closures while others aren’t really seeing the pinch?

Too Many Years of Too Much Growth

My theory is that stores got too accustomed to year-over-year growth. They got used to people living beyond their means and buying anything the stores offered. The stores, in turn, decided they should open more locations to bring in more people to encourage continued sales growth. How many Starbuck’s can one street support? How many Macy’s can one area support? Apparently, not as many as the executives thought.

A slight wobble in sales growth is enough to send those over-built chains scrambling. A store that saw minimal growth from year to year in the past is now seeing sales drop sharply. Stores that were doing robust sales are seeing sales slow, but they’re probably still making sales.

Can Retail Sales Grow Forever?

My feeling? No, they can’t. The US population isn’t growing as quickly anymore, at least not among the segments with money. People’s incomes aren’t growing as fast, either. And frankly, we can’t continue to rely on rampant consumerism to be the backbone of the economy. I think stores need to be prepared for flat sales, or maybe even “negative growth.” If a store can survive that, then it’s a store that should be in that location. If three months of bad sales are enough to close a store, then it’s a store that shouldn’t be there in the first place.

I also heard, anecdotally, that some stores saw flat sales this past Christmas, but they had 50% less inventory. Some people would say that means they could have sold more stuff in a good year. I say that means they didn’t need all that stuff last year, either.

From my perspective, this recession will serve as a shakeout for the stores and production levels that weren’t necessary. It will hurt, but the strong will survive. Hopefully it will encourage manufacturers to produce an appropriate amount of goods, instead of using the “if we built it, they will buy it” method of production.

So, these calls for more buying, more buying, more buying make me very angry. People have stopped buying because they don’t need all this stuff, and they don’t need the stores that sell them. As I said, the shift to a less consumerist economy will hurt, but eventually we’ll find a new way to be. Maybe some of those mini-malls will be turned into parks or playgrounds. I’m not seeing that as a bad thing, even if the pundits do.

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