Is Storefront Retail Dead?

Contrary to the headlines shouting the lamentable death of many physical retail spaces, such as the defeated Toys “R” Us or the no-longer-so-hipster Teavana, storefront retail is not dead. It is going through some changes, to be sure, but it is still alive and breathing, and not just due to life support.

In this new technological era, many worry that brick and mortar retail is being replaced by online shopping. That, though, is not the case. It cannot be denied that online shopping is becoming more and more common, but, according to most estimates, about 91% of all retail sales last year still took place in a physical store. How is it, then, that in such a technical world storefront retail is still doing well? The answer: the increasing bifurcation of retail.

Retail Market Financing

Deloitte recently published a study entitled “The Great Retail Bifurcation” that better brings to light this phenomenon. Their analysis shows that demographic factors, namely the increasing gap between the poor and the wealthy, take a large part in explaining the contradictory outcomes we see in the retail industry today.

Wage stagnation and the rising cost of living essentials is driving lower income Americans to seek out lower cost, value-driven retail options while the increasing fortunes of the higher class give them more disposable income and consequential spending luxury, increasing the sales and revenue in more expensive, specialized retail industries. These two events are causing this division of the retail world, increasing revenue, earnings, and store growth at both ends of the spectrum, specifically the bargain-bragging, value-pricing retailers and the higher end, more unique and aesthetic retailers, leaving the undifferentiated and unoriginal stagnant and floundering.

Retail Mall Financing

The stagnation and consequent decline of these stores, those swimming in one-size-fits-all mediocrity, is likely what has fueled the gory talk of physical retail death. However, those preaching that assumed apocalypse are failing to consider the growth of both specialized and value-based storefronts and their growing success.

So I guess, yes, some storefront retail is dead, but only those that don’t dare to be different. Physical retailers that find ways to stand out, to acutely address the needs of their customers, and to provide an engaging shopping experience are doing quite well and will continue to do so, even in a world of screens.

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Annie Allen

About the author: Annie is a student at Brigham Young University, an entrepreneur, and an avid ice cream eater. She has happily been a team member at American Life Financial for two years now and loves learning about the ins and outs of real estate and lending, as well as the economics that affects the real estate market today.