It's not just retail that's changing, it's us

Tech keeps people busy and gives them an alternative to buying lots of stuff

Despite record highs in the markets, bad news about consumers has been relentless: malls are closing; consumers have accumulated too much debt; incomes are stagnant. None of this bodes well for future consumer spending and economic growth. This is the established narrative — straightforward, based on well-understood data. 

What if something else entirely is occurring? What if many factors are creating an enormous economic shift that we cannot see because we are right in the middle of it? Consider the following: We have been slow to adapt to an ever-increasing set of economic, cultural and technological changes; excepting the young, most of us are not very good at the required adjustments. We increasingly resemble the slowly boiled frog.

The word “revolution” is tossed about too easily, but it is appropriate for the pace and scale of changes we see. Retailers have been having difficulty understanding these changes, much less responding to them. Consider the following five elements as prime drivers of the new “retail misery index”:

Income: Incomes have been flat for the past few decades. The top 10 per cent has seen gains, as have the one per cent — but the biggest gains have come in the top 0.1 per cent. This is reflected in markets like art, mansions and estates, and collectible automobiles. The top 0.1 per cent are not big on malls.

Flat incomes have made the average shopper a much savvier consumer. They are price sensitive, understand how to find bargains, know how to play the stores’ sale game. 

Inflation, deflation, new categories: On the one hand, we have seen relentless inflation in housing, education and medical costs — each driven by different factors. The flip side is the ongoing price decreases in so many consumer products, from clothes to electronics, and most especially technology.

However, new product and service categories simply were not in a family’s household budget 10 or 20 years ago: smartphones, Netflix, tablets, data services, Amazon Prime, web hosting, satellite radio, music subscriptions, etc. Even commercial email service is barely 20 years old.  

Time: It is easy to underestimate the amount of time pressure people face today. It comes from email, instant messages, Slack, etc — all of which follow us everywhere via our mobile phones. We are never unplugged from work. Any sort of time-saving service has a potentially enormous impact. 

Psychology: While the financial crisis left consumers with post-traumatic spending disorder, I want to focus on something else: stuff. Americans used to love stuff of all sorts, but today, we seem to have moved past it. Perhaps it’s part of the shift to digital.

Technology: It’s too easy to blame Amazon for all of retail’s problems. But there can be no doubt that technology has made the retailers’ job much harder. Consumers today are better informed about prices via price comparison engines than ever before. Showrooming is rampant — in which shoppers visit a physical store to browse, but then buy online. 

Even planned obsolescence has become obsolete. These factors all contribute to a downsizing of retail America. We are undergoing a fundamental change in how society consumes products. It is happening both too slowly for us to fully grok, and yet too fast for retailers to adapt.