The Brick and Mortar Bubble

Coming right on the horizon is the collapse of the “brick and mortar” retail bubble. Personally, I almost never shop in a store for anything other than food. I used to visit bookstores, but now anything I buy pretty much is self-published on Amazon, at prices ranging from 1 to 3 or 4 dollars. This cuts out not only the brick and mortar bookstore (RIP Borders) but also the publisher as well.

However, the problem isn’t just books. Far from it.

The top 100 mega-retailers operate 243,000 stores. Will our contracting civilization really need or be able to sustain 14,000 McDonalds, 17,000 Taco Bells & KFCs, 24,000 Subways, 9,000 Wendys, 7,000 7-11s, 8,000 Walgreens, 7,000 CVS’, 4,000 Sears & Kmarts, 11,000 Starbucks, 4,000 Wal-Marts, 1,700 Lowes and 1,800 Targets in five years? As our economy contracts and more of our dwindling disposable income is directed towards rising energy and food costs, retailers across the land will shut their doors. Try to picture the impact on this country as these retailers are forced to close 50,000 stores.

In the comments to this fine piece of analysis is a report from the front:

I’m not exaggerating. If anyone here attends the Vegas ICSC Convention, the numbers in terms of gross sales per square foot, which is the holy grail of retailing metrics, are simply in a state of freefall.

Online retailers have killed brick & mortar, and are now compressing brick & mortar stores even further as the pool of buyers ready, willing and able to buy incremental ‘stuff’ shrinks as a corollary with a massive deleveraging cycle now underway (that easily could last another decade).

If people knew the numbers on the re-sale of foreclosed big box stores in power centers, or the new lease rates negotiated with the remaining anchor tenants, you’d think I was lying to you.

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