Yesterday, Pier 1 Imports filed for bankruptcy. Selling what has been called “funky” furniture, the chain was created in 1962. Among its more than 1000 stores, now 450 might close.
We could say that Pier I is an example of a “retail apocalypse” caused by the internet.
But, retail is not really dying and the reason that stores are closing is not entirely the internet.
Reasons for the Retail Apocalypse
Our story starts during the 1920s when we spent 38 percent of our income on food and 17 percent on clothing. If we fast forward a century, we see food at home and away occupying 10 percent and clothing, 2.4 percent. I know. You could be saying to yourself that the lower percents still represent lots more money. Instead, though, it’s about our attention pivoting to so much more than those food and clothing expenditures. Our buying behavior is much more focused on the services not sold by traditional retailers at malls.
Our spending on education and healthcare is skyrocketing:
Big Box Stores
Next, we can add the increasing presence of stand alone big box stores. We are buying more at warehouse clubs and supercenters like Costco and Sam’s Club (Walmart). Economist Austan Goolsbee tells us that our online purchases through Amazon have certainly lured us from the mall but so too have other kinds of bricks and mortar stores.
Smaller Middle Class
Furthermore, retailers have been adjusting to the split in demand. More is coming from the high end and the low end but not the middle. The problem though is that traditional retail has catered to the middle.
A reality check reveals that, at 11 percent of retail sales, e-commerce is not yet gargantuan. Please think of autos, gasoline, garden supplies, home improvement, pharmaceuticals, food, and drink. There are lots of items that we minimally buy online.
So yes, topping 2017 and 2018 totals, retailers closed more than 9000 stores in 2019. And some had over expanded (but Wayfair tells us it did too) and some had misjudged consumer tastes and had to endure a tariff squeeze.
But the reasons for the store closings are about much more than Amazon and the internet.
Our Bottom Line: Retail Restructuring
Perhaps we can end where we began. The demise of Pier 1 is not about a retail apocalypse. It takes us to the retail version of what Mark Twain said about a mistaken obituary. The reports of its death are greatly exaggerated.
My sources and more: Thanks to the NY Times reminding me it was time to return to the (purported) retail apocalypse. From there, it made sense to read about the impact of big box stores, this article, and a Deloitte Report. And finally, these recent stats from WSJ came in handy.