Sheets of newspaper scratch along the dusty linoleum floor as the wind beats them into the remnants of a bench… or through the open glass door and into the darkened, empty space beyond.
Escalators haven’t run in decades. The air itself looks dusty.
Could this really be the future of the American mall?
Well… yes! It’s bad and it’s going to get worse, but I’m writing today to tell you it was totally predictable!
In fact, just like we forecast that Harley Davidson would suffer, so too did we forecast that retail stores would take it in the nuts as the Baby Boomers moved along their predictable spending wave!
Yes, the retail, brick-and-mortar, industry is suffering because there are too many stores… because online shopping is growing exponentially… and because shoppers are “moving toward experience…”
And yes, Amazon’s stock price has surpassed the $1,000 mark and continues to climb.
Many investors still believe in the Trump magic wand of lower taxes and regulations that will not be as big an impact as economists think because businesses are already over-expanded from the bubble boom and we are back at full employment.
But there’s something so much bigger than all of these things going on, and everyone seems to be missing it!
Even the mainstream media is missing what’s right in front of their noses!
Two words: Baby Boomers.
All of these retail store closings and all of these bankruptcies were all baked into the cake when the massive Baby Boom generation peaked in its spending in late 2007.
Affluent households spend a lot on their kids and college education, until they’re about 51 years old, after which we see a dramatic drop-off in spending. For the U.S. Baby Boomer generation, this started in 2012 (on average).
Spending on apparel and related services, like dry cleaning, peaks into age 47, which means retailers would have begun feeling the pinch back in 2008.
And if you look at the numbers below, from the annual Consumer Expenditures Survey, that’s exactly when they started to struggle…
Yes, online shopping has taken some of the pie, but for clothing retailers, that’s not as much the case.
Think about it: You can’t judge the quality of a fabric or design online. You can’t try the outfit on to see how it looks or our comfortable it is.
So, as the Baby Boomers continue to age, clothing retail stores like Macy’s and JCPenney will continue to suck more and more wind! I’d hate to be in that industry.
But then there’s the death knell for malls and department stores like Sears and Kmart, who have already started closing doors around the country: The rise of Amazon and the e-commerce sector. In this case, not only do demographics play a role, but so does technology. Look at the data below…
When you take out auto sales (that will eventually move to the Internet, just not yet), e-commerce has grown to a whopping 28% in early 2017.
And Amazon, who has already gone into the grocery business, is now looking at going into prescription drugs!
Malls and department stores are dead! And the clothing and discretionary food purchases were the last strongholds.
One thing is for sure, keep clothing retailers, department stores and malls out of your investment portfolios, unless you’re shorting them.
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