Home > Critical Thinking, Current Affairs, Dystopia, Musings, Philosophy sans Sophistry, Reason, Secular Religions, Skepticism > Financialization is Cause of Decline in Brick-and-Mortar Retail in USA

Financialization is Cause of Decline in Brick-and-Mortar Retail in USA

Here is another topic I have been thinking about writing for past few years. As most readers know, there is no shortage of evidence that physical retail outlets have been on an irreversible decline in USA and other parts of Anglosphere for at least the past decade. In fact, most idiots in this group of countries seems to believe that the rise of Amazon and other online retail outlets was a cosmic inevitability. Except, that this is not true. The thing is.. physical retail outlets are in very good shape in every part of the world that is not an Anglosphere country. Even more curiously, countries with a very well-developed online retail sector such as China still have a much bigger and dominant physical retail sector. It is as if online retail outlets can coexist and complement physical retail in all countries that are not part of the Anglopshere.

So what is going on? Why is the retail sector, also, in free fall throughout the Anglosphere. As you will soon see, the factors driving demise of physical retail in this group of countries are almost identical to those which previously led to widespread de-industrialization, privatization of public goods, episodes of financial austerity, rise in precarity of jobs and careers and much more. It comes down to late capitalism aka neoliberalism aka financialization. To understand what I am talking about, let me ask you a simple question. How do physical retailers in the West manage to go under while their equivalents in other countries remain strong or grow. This is especially hard to explain when you realize that people still need the products which they sell ranging from clothes and shoes to furniture, appliances and musical instruments.

Let me try explaining the changes I have witnessed in this sector over the past two decades. As some might remember, I moved here when I was 20 in the late 1990s. At that time the physical retail sector in West, while having gone through a few prior contractions, was still quite healthy. The shops and department stores were well stocked with a diversity of products that people wanted, there were always enough salespeople around and businesses were still making a steady but decent profit. So what changed between late 1990s and today? Well.. for starters, there has been a shrinkage in amount of disposable income for most people in West. But this, by itself, does not explain why physical retail is still doing very well in Continental Europe, East Asia and every other part of world. Also, many products sold in West have become relatively less expensive due to outsourcing from China and Mexico.

And yet retail stores in the West, large and small, have been going out of business at a much higher rate than at any time since WW2. More problematically, the ones going out of business are not being replaced with others of similar size. Even many large chains which survived the great depression have recently gone bust or are on the verge of going tits up. What makes Western physical retail so fragile when compared to its Asian or European counterparts? Here is my partial explanation, based on what I saw over past two decades. Let us start by talking about three large departmental store chains, which shall remain unnamed. Out of these three, two went belly up during past decade while the other one is on life support. I am using these three as examples because I used to frequent them and bought tons of stuff from them over the years.

See.. in the late 1990s, all three chains were doing very well. They sold tons of stuff which people wanted, had knowledgeable sales staff and paid attention to the quality of products they were selling. Sure, they were more expensive to shop at than WalMart but they had no problems attracting customers and making a steady decent profit. The demise of first chain, which used to be a family name in party of country I live in, began once a management style took over in the mid- to late- 1990s. Under the guise of increasing shareholder value, the new management started doing short-sighted shit such as selling their ownership off their coveted physical retail space and renting it back, laying off older experienced employees, flooding their shelves and racks with items of lesser quality and making their remaining employees push credit cards and extended warranties. A brand name which was once synonymous with good quality, reasonable prices and experienced salespeople increasingly became associated with poor customer experience and shitty products.

Increasingly, decisions about which products to stock were exclusively made by a bunch of MBAs and other assorted bottom-feeders in their ‘headquarters’. They had no interest in the feedback of their employees who understood their local markets and customer tastes far better than the greedy assholes at HQ. To make matters worse, they spent all their short-term financial gains on giving themselves hefty bonuses rather than spending that money on updating their stores. You can guess how all of this ended. After a decade of such bold and innovative changes in management style, a large chain which was once a household name in that part of the country went under. Oh.. and they stiffed their employee pensions on the way out. If all of this sounds familiar, it should be because this is the rough template followed by almost every retail chain that has gone under or is in the process of doing so.

The next chain I am going to talk about is Sears, and most of you know how that shit went down. While Sears was being mismanaged for at least two or three decades, things went especially bad towards the end (link 1, link 2, link 3 and link 4). So let us move on and talk about another large and well-known departmental store chain which is not dead yet but is pretty close. Once again, it went down the same pathway of “new management styles” which led to under-staffing, selling inferior products, trying to push products which nobody wants to buy, spending little to no money on updating stores, an incredibly bad online sales portal and treating both its employees and customers like shit while helping themselves to tons of money in the form of performance bonuses.

But you know what is truly surprising? The pattern of management malpractice and looting remains constant in the Anglosphere whether the afflicted corporation was selling clothes, shoes, appliances, electronics, toys, guitars or making appliances, cars and aircraft. Their demise was not, therefore, due to business conditions in that sector. Rather, it was due to a very specific style of management which gained primacy in Anglosphere starting in the 1980s. To put it another way, the management of western corporations has become the functional equivalent of viruses that infect cells, extract all the resources they can and then move on to infect other cells to continue this cycle. The poor adoption of this parasitic ideology outside the Anglosphere is also why Asian companies remain dominant in Automobile manufacturing, continental Europe still retains a decent percentage of its manufacturing infrastructure and physical retail outlets outside the Anglosphere are still doing just fine.

What do you think? Comments?

  1. blaquer
    November 27, 2020 at 9:57 pm

    I keep reading people say, “oh this is just the business cycle, now is the time to buy (property, storefronts, stocks etc) while everyone is afraid! Those empty stores will all be back and roaring after Covid!” which is stupid and ignores the reality of what you have posted here. What the fuck is going to happen to this country in the next decade???

    It seems like either we are going to HAVE TO have a fairly sizable PERMANENT UBI, as well as large scale debt forgiveness or….. I dont even know? The Purge??? Covid is just the cherry on top, and that shit isn’t going away soon imo. Is this vaccine even going to work? The whole vaccine thing was so full of fraud, I remember KODAK STOCK fucking skyrocketed bc they said they were making a vaccine! WHAT THE FUCK MAN! AstraZenica got caught lying about their efficacy %. I trust vaccines, but not this one and I doubt I am alone.

    AND, not related to this article but a top scientist was just assassinated in Iran… I thought Trump would try to start a war to not leave office, but lately it seemed he had given in. Now I dont even know…

    • abprosper
      December 1, 2020 at 2:35 pm

      Its not going to change until collapse or one faction or another decides on civil war as a solution . At that point, any nations caught up in that will have to have a new currency if they rebels win. This will create vast poverty and war but such is life.

      UBI will be tried as a great reset kind of thing but thus far its trial run as COVID 19 relief has been a boondoggle at least in the US Its doesn’t control for the cost of housing and food inflation and anyone who could get by without it used the money for debt relief.

      You can’t really regulate that away. Certainly you can treat relief like food stamps/EBT and limit how its used but this only frees up other monies or if the monies aren’t there, its moot as it would have been spent on the basics anyway.

      The goal of the elite here is more consumption and more debt so they can live in interest but less suckers are born each year and the more a fluent ones are checking out of old age, Its not sustainable but by goodness they sure will try.

  2. doldrom
    November 28, 2020 at 2:12 am

    Two more factors:
    1. Way more retail in NAmerica are chain stores, franchises, etc. When I came to Europe I was surprised by how many shops were run by the owners. The trend is downhill here too, but it was the last I expected after all the porridge fed to me about entreneurship in America.
    2. The US specifically has like 5× as much floor space for retail as the next country on the list. The complete overleveraging of commercial retail space for an orgasm of consumption has not materialized, leaving the sector with enormous sunken costs and especially debts.

  3. doldrom
    November 28, 2020 at 2:14 am

    In Europe it is pretty much axiomatic that if a company is acquired and gets American management, it will mark the end of employment, the value of the company, and the relationship with the community: American mgmt basically amounts to looting…

  4. President Not Sure
    November 28, 2020 at 9:45 am

    I’ll propose some explanation for this situation:

    If you try to take your company public in the US, lavish amount of money will be thrown by investors for your company’s stocks.

    Try to take a similar company public in a second or third world country, and it’s quite a headache to attract even a pittance of change for your company’s stocks.

    And when you cannot get a reasonable price for your company, and yet you believe in yourself and your company’s future, you’d rather keep it all for yourself and not go public.

    So maybe the reason for the west’s decline is an overdeveloped stock market and too much money splashing around eagerly seeking to extract immediate profit and perverting the incentives of every activity with some perceived economic value.

    • MikeCA
      November 28, 2020 at 5:14 pm

      “So maybe the reason for the west’s decline is an overdeveloped stock market and too much money splashing around eagerly seeking to extract immediate profit and perverting the incentives of every activity with some perceived economic value.”

      This is closely related to income distribution. The wealthy have too much income to spend, so they pore much of it into investments. The problem is their are not enough good companies to invest in, so they run up the prices of stocks including speculative startups.

      • President Not Sure
        November 28, 2020 at 8:30 pm

        “This is closely related to income distribution. The wealthy have too much income to spend, so they pore much of it into investments. The problem is their are not enough good companies to invest in, so they run up the prices of stocks including speculative startups.”

        True, and I’d speculate a big culprit for all this is the dollar’s status as a reserve currency for the world (which luckily seems to be coming to an end soon).

        Being a global reserve currency allows the central bank to print much more new money than if it were only a national currency.

        But you and I don’t get those money. Instead big sharks closely connected to the banks and the power elite get them, and then they proceed seeking the maximum profit they can make without understanding the industries they invest in and without allegiance to the companies they invest in.

      • MikeCaCa
        December 1, 2020 at 12:06 am

        but, but does Jim Crow Joe sing as good as Freddy Mercury…

  5. The Decline of Western Civ...
    November 28, 2020 at 1:14 pm

    Guitar Center looks like it is going to go BK. It has had scares in the past and it looked like it was able to avoid BK fairly recently as interest rates went down and they were able to refinance their debt…

    There are many things in this post that allude to the (eventual) downfall of GC…

    A crappy online portal…

    Both Sweetwater and Reverb are much easier to navigate and have better pictures.

    At one point there were GC employees who were seen as experts and some were working musicians. It wasn’t unheard of for a sales rep in the Pro Audio dept to clear 60-70k yearly. Now, it is minimum wage kids who know very little about what they are selling but are there because it is better than flipping burgers. (Low institutional knowledge…)

    Many reputable brands such as Mesa Boogie have long left GC. There are likely multiple reasons for this. One being that it is difficult to demo higher end gear at a place like GC. Another is that the less experienced sales reps don’t know how to properly set up the gear. (Have heard horror stories such as leaving packing materials on the tubes of a tube amp or using a guitar cable to power a speaker cab.) And the third is that GC often violates MAP pricing and tells manufactures to “get over it.”

    Another thing, GC is or was owned by Bain Capitol, y’know that RMoney fleabags company. Look what they did to KB Toys….

    …and they are known for selling B stock at A stock prices. (B stock being gear with minor finish flaws/ scratches or returns/open box items.)

  6. Salty Nutz
    November 28, 2020 at 9:00 pm

    The problem i see are zoning laws. Imagine if you could apply for a home mortage and the front living room of your house could be a cafe or shop instead of wasted space

  7. hiveguys
    November 28, 2020 at 9:57 pm

    Former retail worker here.

    A few observations from the ground:

    Decline in merchandise quality:

    – On the shop floor big name and reputable brands have been crowded out by store brands, because store brands earn massive profit margins – for some items as high as 85%. Name brands on the other hand, as little as 5%. Therefore store brands make KPIs look much better.

    – Name brands don’t move as quickly because they’re more expensive, so retailers don’t want their equity tied up in them.

    – For the name brands, sadly, it’s becoming a case of “Can’t beat ’em? Join ’em.” They either whore their names out to cheap Chinese manufacturers to make substandard merchandise at more competitive prices, or they produce their own “budget lines” in addition to their better stuff.

    – The reason stores don’t sell what people want anymore is that many of them source their stock by buying supplier “leftovers” for cheap – old lines, products that have failed in other markets. Again, this is much lower risk and promises more short term gains than having a regular high quality product line-up.

    Other:

    – Rents are ridiculously high. Malls increase rents according to higher profits. It’s neo feudalism.

    • Just A Programmer
      December 2, 2020 at 1:18 pm

      I have noticed a decline even in the best regarded on line merchants. Cheaper fabrics, sizing is more erratic.

      Sad that we live in a technological world of miracles but we are increasingly surrounded by junk.

      • hiveguys
        December 3, 2020 at 1:23 pm

        Try Harrods in London. $1200 for a t-shirt. $106 for a Gordon Ramsay burger.

        I guess one way to avoid modern retail decay is to be owned by a wealthy oil nation, with a side order of money laundering.

  8. Just A Programmer
    November 29, 2020 at 5:05 pm

    Sears – I remember in mid 80s when Sears Automotive went over the cliff. Before then you could get repairs there done relatively quickly and cheaply. Then suddenly the skill level declined. Also Sears, I stopped going to their stores because checkout was an ordeal. Understaffed and very slow because they would try to get everyone in line to sign up for credit cards or loyalty cards.

    Target still seems to be doing OK. I suspect they and Walmart will be the last two major national chains left in a few years.

    And rents, both for mall stores and for regular storefronts, gobble up small retailers’ revenue, making even fairly busy stores into marginal operations.

    • hiveguys
      December 3, 2020 at 2:05 pm

      They tried to start pushing store credit cards at my old place, where we were to have a quota of sign ups per week. There was pretty much a grassroots revolt on the matter, where a fellow staff member put the Lumburg-esque assistant manager on the spot by asking her, “How would you personally pitch the card to a customer?” only to be told repeatedly, “Yyyyeah I’m going to go ahead and print you out a copy of the guide.” There was nothing in that fucking guide about why a high interest credit card with a hefty annual fee that could only be used at one store was any better than any basic low interest low fee Visa or Mastercard that could be used anywhere in the world. Or even better, paying cash, and not getting into debt and paying interest at all.

      The store managers all made it known to corporate that it was unviable, so they had no choice but to squash it. Then we just had to contend with nagging people to hand over their email addresses, which I would only do if people told me they wanted to know when the big sales were on.

  9. abprosper
    December 1, 2020 at 2:29 pm

    Financialzation and Management are certainly contributors but so is the inability of stores to stock things customers actually want or need.

    There are a lot of things that are simply easier to order online from Amazon or wherever than to waste time in a store shopping for.

    Also there are a lot of goods especially in entertainment that have little to no physical presence, books, movies, games, music all streamed. Many of these things are used on a phone or computer which is used for other purposes so this cuts into hardware like stereos as well.

    That’s basically an entire category of goods gone.

    On top of that, toys even without the machinations of big capital are a declining business

    Fewer and fewer babies are born in the developed world each year both in absolute numbers and total fertility rates. On top of that a lot of parents give kids apps instead of toys. This is stupid to say the least but it cuts into sales.

    This leaves basically means consolidation and Wal Mart mostly covering that niche.

    Toys R Us CEO even noted that in speech about his Babies R US

    Thus each year a smaller market throw in a shrinking wage level for all but the top 11% or so (1% all the gain, 10% beak even) everyone else screwed and you have the recipe for disaster .

    • Just A Programmer
      December 2, 2020 at 1:16 pm

      Try having hard to fit sizes. You can drive 50 mile round trip to the one store that stocks shoes in your size, and maybe they have a style you want, or you can order from manufacturer’s website and have the shoes in a week.

      Or worse, have someone try to convince you that 12 D is just as good a fit as 13 DDDD.

      One example of many I could give.

  1. January 28, 2021 at 2:31 am

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