The Retail Industry
- Malin Phelan
- Feb 19, 2021
- 3 min read
Updated: Oct 2, 2021
Author: Malin Phelan '23
The retail industry is struggling as a result of COVID-19. This is an undeniable fact, with a sharp decline in brick and mortar shopping in recent months due to social distancing and other restrictions. Sales have taken severe hits, causing several big-name corporations to file for bankruptcy: J. Crew, Lord and Taylor, and J.C. Penney among them, just to name a few. Although some (including J.C. Penney) have emerged under new ownership, most companies entering the bankruptcy stage have struggled to resurface. Pier 1 Imports, GameStop, GNC, Gap, and Bose are just a few corporations planning on closing hundreds of stores across the United States this year. Before the pandemic, 20% of all non-food sales were made via the internet, a number that has been driven up to 50% at its peak in July and still hovers above 40% currently. Clearly, COVID-19 has had a brutal impact on retail.
What we often fail to consider while debating the downturn in brick and mortar sales recently is that this is nothing new. Rather, the pandemic has only further damaged an industry already on the decline. Department stores and chains which once dominated every city block created hundreds of jobs in smaller towns, and were a staple both in America and across the world are being shuttered and closed down at ever-increasing rates. Retail has taken a severe hit this century due to the rise of internet accessibility and online shopping. 9,300 retail stores closed in the United States alone in 2019, a number that will only escalate with time.
When the internet emerged as potentially the most practical way to shop, large retailers scrambled to keep up with a much-needed digital approach, both in terms of advertising and actual sales. Some have had success - but others have been unable to keep up at the rate needed in our digital world. One store that has adjusted well has been Target, which shifted its business model online relatively quickly while maintaining a strong retail presence. Its goal has been to grow within e-commerce and has done well, increasing 34% in this area in 2015. Additionally, Target invested 2 billion dollars into online marketing in 2017, a further indication of their commitment to finding a necessary place in the digital world.
Not all big-name corporations have adjusted this well, however. Large, established department stores have been some of the most significant examples. Lord and Taylor, one of the oldest and most iconic department stores in the United States, filed for bankruptcy this August after years of attempting to fit into the e-commerce world. Neiman Marcus did the same in May of this year, but it wasn’t solely due to the pandemic - the previously popular, well-known department store has struggled to find its way in e-commerce for years with little success. J. Crew has also filed for bankruptcy, and has since emerged - but only due to its dependence on sister brand Madewell. These three are just a few examples, with many more once-prosperous retailers mirroring their issues.
The elephant in the room? Amazon. Founded by Jeff Bezos in 1994, the online supergiant has had possibly the greatest impact on retail. Its online presence has a monopoly-type feel at times, with constant purchases being made due to its accessibility. The shadow that it’s cast on retail is undeniable and ever-growing. Its buyout of the flagship store for Lord and Taylor (as discussed previously, one of America’s oldest department stores) on 5th Avenue in New York City and subsequent replacement with an Amazon warehouse is truly representative of its reach. While many retailers have struggled during COVID-19 times, Amazon has only grown, increasing its Amazon Prime memberships throughout this world-shaking event.
Amazon has also been methodical with its growth. When it bought Whole Foods in a 13.4 billion dollar deal in 2017, it further expanded its reach and client base. This increased accessibility to Whole Foods by lowering certain prices, and also gave Amazon a greater appeal, driving up its credibility. It also challenged Walmart, another big-name retailer that has struggled to keep up with e-commerce in recent years. With the acquisition of Whole Foods, Amazon increased its hold in society, reinforcing the magnitude the online service has.
Many are displeased not only with the rise of Amazon but with online shopping and e-commerce as a whole. It begs the question - what role do brick and mortar sales play in our future, if at all? This is in the hands of the consumer - and a question where the answer is ever-changing.
"Amazon’s brutal vision for retail is one where automation replaces good jobs.” - Marc Perrone, president of the United Food and Commercial Workers International Union (New York Times)
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