Last week Macy’s said it was going to close 100 stores. Meanwhile Walmart announced it was buying Jet.com for $3.3 billion and closing 154 of its U.S. stores.
Really though, the big message is that the department store is dying.
The Death of the Department Store
At the mall, we are going to H&M and Zara. At home, we are ordering online. The result? Between 2001 and 2013, department store sales plunged 35%.
Below, we have a mirror image. Non-store retail sales (at Amazon) are up and department store sales are down:
Our Bottom Line: Creative Destruction
The death of the department store is about Joseph Schumpeter’s creative destruction. Replacing the old with the new, creative destruction is the process through which an innovation or industry replaces what had existed. As an engine of economic growth, it has elevated our GDP and our standard of living.
The downside though can be devastating.
With the Walmart store closings, more sparsely populated, less affluent parts of the U.S. will be hit hard:
When a Walmart closes, a small town experiences a ripple of unemployment. Walmart’s employees lose their jobs as do other workers because the town no longer receives Walmart’s tax dollars nor its charitable giving. Other nearby retailers suffer as do the plumbers and electricians that service these establishments.
Ranging from the the impact of the Model T Ford to robotic manufacturing, the shift to online shopping requires painful restructuring. But like all creative destruction, the result is an energized economy.
My sources and more: Listening to Macy’s 2nd quarter earnings conference call, I got a pretty good picture of the plight of the department store which was confirmed by this Washington Post Wonkblog article. From there, it made sense to check the impact of a Walmart closing and the big retailing picture that fivethirtyeight and Quartz described.