Who’s Zoomin’ Who?

There is a school of thought which holds that an untruth, repeated often enough, becomes accepted by the public as truth. There are certain politicians, both historical and contemporary, who have relied very heavily upon this belief. I won’t name any names.

Last fall, I read an article in a newspaper which stated that online sales would exceed brick and mortar over the Christmas shopping season for the first time. Subsequently, I read the same line repeated as gospel by several talking heads on cable news programs. That prediction wasn’t just inaccurate, it was ridiculous.

It was based upon a survey which asked consumers whether they would shop in stores or online. More of them said they would shop online, and that may have turned out to be the case, but in terms of spending it isn’t even close. E-commerce amounted to around 12 percent of the total, meaning that stores did more than seven times as much business as websites.

Nonetheless, I have heard people outside the media business say that e-commerce has outgrown brick and mortar, so perhaps the misconception has sunk in with the public. Similarly, a lot of people seem to think that Amazon is now America’s largest retailer.

Just to be clear, Amazon is the seventh largest retailer in the U.S., and the only online merchant in the top 10. Walmart’s sales are roughly five times that of Amazon. Unless you follow these things, you might be surprised to learn that there are two drugstore chains, Walgreens and CVS, which are both larger than Amazon.

The question, of course, is not where we are but where we’re going. There is no question that the internet share of retail is still growing, and will continue to reshape the way we all shop. In looking back at the business press commentary over the past year, however, there seemed to be a growing consensus that physical stores are here to stay.

One of the more succinct pieces I found was published by Forbes magazine last June, entitled “Five Signs that Stores (not E-Commerce) are the Future of Retail.” Author Barbara Thau makes a case that it is pure-play online shopping that is the “imperiled model,” not brick and mortar, and that Amazon and eBay are the exceptions which prove the rule.

Nine of the top 10 retailers are conventional stores, and all but one of them, Target, showed an increase in sales last year. Walmart was up 8 percent. What gets less reported is that they are also more profitable than online merchants, whose margins have been steadily shrinking over recent years.

The purchase of the Whole Foods chain by Amazon was widely viewed as a watershed moment in the bricks-versus-clicks argument. Amazon has dabbled in physical stores before, but Whole Foods is not a hobby or a vanity acquisition. With 460 stores, it is the 30th largest retailer in America, and represents a clear signal that Amazon is bullish on brick and mortar.

Another group that likes physical stores is the millennial generation. It has always been a general assumption that younger people would prefer e-commerce because they had grown up immersed in technology, and liked to use electronic devices for everything. It turns out they don’t.

Surveys show that millennials (born 1982-2004) prefer shopping in stores, and that Generation Z is even more brick-friendly at 77 percent. These guys already exceed baby boomers, and if those preferences continue it will gradually improve the picture for conventional retailers.

Given all that, you might wonder why you see so many mall stores disappearing these days. In the Forbes piece, Ms. Thau says that we were “vastly overstored” because the retail landscape was sized for a pre-internet world, and because post-Great Recession shoppers are less materialistic.

I agree with the first half of that assessment, but I rather doubt that we’ve witnessed a change in human nature, at least in any sort of permanent way. I would also argue that we were overstored even without the internet, having more than double the retail space per capita as the rest of the industrialized world.

Which brings me to the heart of the matter. People often ask me how many teacher stores there are in the Unites States, but I think the more critical question is “how many do we need?”

When I was a salesman calling on school supply dealers in the late 1970s and early ’80s, there were literally thousands of teacher stores throughout the country. Some were chain stores, some were run by regional or national distributors, and some were independents. In California, they were so commonplace that many were in walking distance of each other, though of course no one ever walked it.

If you consider the total population of elementary teachers, around a million at the time, and how many of them bought from other sources, I think we had a lot more stores than were really necessary. Even if the internet had never happened, there would likely have been a correction.

It did happen, though, and what might have been a correction was more like a purge. There are still thousands of businesses involved with selling school supplies, but only a few hundred that you would describe as pure teacher stores.

As the massive changes in retail have begun to shake out, it increasingly appears as though the real losers are department stores. It is very hard to be a generalist against the virtually infinite variety and inventory of e-commerce.

Conversely, it seems that a likely winner in this scenario is the relatively small specialty retailer, assuming that he carries depth of carefully selected product, provides outstanding, personal service, and offers a pleasurable in-store experience.

When so many educational stores closed, it had to make all of us in the industry wonder whether the rest would follow. A lot of those closures were great stores, and if they couldn’t make it, why should we think others could?

The other way to look at it is that the pendulum swang too far, as it so often does, leaving us significantly under-stored. Just as independent bookstores have been coming back over recent years, teacher stores may be due for a revival.

That’s why I was so interested in the “WeConnect” trade show in Orlando last November. It was refreshing to see a room full of people in the teaching aid business that were so upbeat for a change, and I came away with a much more positive attitude about the retail side of our industry.

Perhaps we can put some of those vacant storefronts to good use.

You can e-mail Kevin at kfahy@fwpi.com.

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