After a respite in 2021 and 2022, US retailers appear headed for a flurry of bankruptcies, with Bed Bath & Beyond Inc. leading the way. There’s a story behind every retailing failure, with Bed Bath & Beyond’s kind of a doozy, and some of the current troubles can be chalked up to a cyclical economic slowdown. That said, outside of two now-gigantic sectors on the rise, retailers have been battling headwinds and going bankrupt for a while. Maybe things are just returning to normal.
One of the rising sectors that has been taking market share from traditional retail is, of course, e-commerce. The other is gigantic-box retailers such as Costco, BJ’s and Walmart Supercenters. In 2015, economists Ali Hortaçsu and Chad Syverson argued that for all the hype about online sales, the latter sector had actually been the bigger disruptor of the retailing business over the previous two decades. That hasn’t really been true since, with retail sales by what the government statisticians quaintly call “electronic shopping and mail order houses” surpassing those for “warehouse clubs and superstores” for the first time in May 2016. But both have been running at a different speed from the rest of retail for most of the past three decades.
Here’s another way of looking at the same data, with e-commerce and warehouse/superstores combined.
The retail trade numbers used here don’t include food services, and I chose to exclude motor vehicle and parts retailers and gasoline stations because they, too, represent a type of retailing different from the one that e-commerce and warehouse stores have been disrupting.
Warehouse clubs and superstores sell gas, too, but you get what I mean. Also, retail sales are sorted by establishment rather than by company, so it’s possible some of those superstore gas stations are treated as separate entities in the data. That’s definitely the case with online sales; if you buy something from Walmart.com, it shows up under electronic shopping unless you pick it up in a store. Meanwhile, if you order online from a single-location store that also does in-person sales, this will usually be counted under that store’s retail category.
Both sides of retail’s upstart/establishment divide have experienced big sales gains over the past two years, but a lot of that is inflation. It’s not obvious which price index to use to adjust for this. Retail sales represent physical items, which is an argument for using something like the personal consumption expenditures price index for goods, which has risen a lot less in recent decades than indexes that include services. But retailers are competing with non-goods sellers for employees, customers, real estate and investors, so I chose to go with a measure that better reflects overall price trends: the consumer price index excluding food and energy, also known as core CPI:
Adjusted for inflation in this way, sales at traditional retailers flatlined in the 2010s and were lower in February 2020 than in the years before the global financial crisis. They then collapsed at the beginning of the pandemic, but since the summer of 2020, they’ve been doing quite well. Here’s a close-up of recent developments, with e-commerce and warehouse/superstores separated again so you can see how different their trajectories have been.
It can be hard to gauge growth rates from looking at a chart like this, so here are the percentage changes in real sales from February 2020 to October 2022 for the three groups:
- Electronic shopping and mail-order houses: 48.9%
- Other retail trade ex auto and gas: 10.6%
- Warehouse clubs and superstores: 4.8%
Here they are since October 2021:
- Electronic shopping and mail-order houses: 2.6%
- Other retail trade ex auto and gas: -0.2%
- Warehouse clubs and superstores: -2.9%
Traditional retailers are still losing ground to e-commerce, but the pace of those losses has slowed. They’ve actually taken some market share from warehouse clubs and superstores. And while for the past year they’ve been treading water, given their sales gains before that, treading water isn’t so bad.
Overall, the pandemic has been good for purveyors of tangible things. Consumer spending on durable goods boomed in the second half of 2020 and first half of 2021, and while it has settled back somewhat since, it is still running well above the pre-pandemic trend.
This goods boom could at first be explained by the fact that (1) people had lots of money because of pandemic aid and a booming stock market and (2) couldn’t spend it on travel, dining out and in-person entertainment. That spending has remained strong even as those forces have faded is interesting, and encouraging, for retailers. Yes, some bankruptcies are coming. But for traditional retailers there’s not much sign yet of a return to the pretty unpleasant normal of the 2010s.
Bloomberg News provided this article. For more articles like this please visit
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