Brick-and-Mortar Stores Come Tumbling Down

retail etf“Build it and they will come” may still apply to a baseball field à la Field of Dreams, but the saying is no longer relevant to retail store owners that once thrived from running multiple locations.

In fact, the new retail creed is more like “less is best” as thousands of store closures are slated for 2014. Sears Holdings Corp(NASDAQ:SHLD), Best Buy Co Inc(NYSE:BBY), Wal-Mart Stores, Inc.(NYSE:WMT), Macy’s, Inc.(NYSE:M), RadioShack Corporation(NYSE:RSH), Barnes & Noble, Inc.(NYSE:BKS), Target Corporation(NYSE:TGT), and many others plan to shut down thousands of stores this year.

There are a couple of reasons for the mass exodus…

It reflects the growing popularity of shopping on the web instead of at stores or in a mall. In fact, not a single indoor mall has been built since 2006, and many analysts agree that it may not happen again in our lifetime.

EMarketer reported growth in American e-commerce sales from $188 billion in 2010 to $262.3 billion in 2013. By 2017, sales are expected to hit $440 billion. Shopping via mobile devices including smartphones and tablets is also soaring. Sales totaled $41.68 billion in the U.S. during 2013, a 68.2% increase over the previous year.

So, Americans are spending. They’re just not visiting physical stores nearly as often. We’ve become far more comfortable with online transactions and security. Plus, why get behind the wheel of a car in harsh weather, hunt for a parking space and wait in line when you can buy the same products for a lot less hassle – and often less money?

Another reason for the downsizing trend relates to overgrowth of the U.S. retail industry before the 2008 recession when 1,122,703 stores took up 14.2 billion square feet of space, according to the 2007 U.S. Census Bureau. That equates to about 46.6 square feet of retail space per capita in the U.S. To put that in perspective, India has 2 square feet per capita, Australia 6.5, Canada 13, and the U.K. 23.

More like a glut than overgrowth, the rapid success and popularity of e-commerce probably just sped up an inevitable shift away from brick-and-mortar stores.

So Now What?

Stores may be closing, but companies aren’t going out of business. They’re simply weeding out locations that


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