Last month I wrote up my annual tirade about the National Retail Federation holiday sales forecast. The NRF’s track record -- it uses a deeply flawed methodology -- is terrible. The group makes a silly prediction, I make fun of it, they call me a Grinch, a good time is had by all.
Except for the retailers.
Retail stores are on the front lines of an industry undergoing enormous and wrenching change amid huge shifts in consumer behavior. The simple complaint that online retailers are stealing sales from brick-and-mortar stores is unsatisfying. Online shopping may be convenient, offer an endless array of products, make price comparison easy, provide fast and cheap or even free delivery and so on. Yet despite these advantages, online sales amount to but 10 percent of all retail sales.
What is really going on?
American society has undergone a titanic secular transformation. Retail stores are the first to suffer the effects of this economic disruption. Generational change is affecting how consumers behave; not just how America shops, but for what, and for how much and even why.
Two broad economic trends set the backdrop: too much retail and too little gain in wages. America has built way too many stores and malls. Second, wages adjusted for inflation have been little changed for three decades; this has squeezed the middle class, especially when it comes to discretionary spending.
But the behavioral changes taking place are for all retailers, and not just for those occupying real estate. This also has implications for shoppers, landlords, lenders and workers. Let's consider these secular shifts:
Millennials versus boomers: For most of their lives, baby boomers were the biggest demographic age cohort in U.S. history. The generation born in the years after World War II had an enormous impact on the development of U.S. retail, from specialty stores and malls to big box stores and discounters.
Alas, the prime spending years of the boomers are now behind them. They have purchased their homes and vacation properties, furnished them, bought SUVs and luxury cars. Now in their 60s and 70s, thousands of them retire every day. Their next big purchases are more likely to be travel or health care.
The new shopping kings are the millennials who passed the boomers in size last year, although they are a smaller share of the total U.S. population than boomers were at their peak. This demographic, still in their prime spending years, is coveted by advertisers. Yet retailers still don't seem to understand how this group behaves as consumers.