It wasn’t that many years ago that you had to leave your home and visit a bricks-and-mortar business to purchase any type merchandise or entertainment, which you either enjoyed at the location or took home to enjoy.
Remember Tower Records or Virgin Megastores? You had to go there to buy your records, then 8-tracks, then cassettes and finally CDs. You won’t find those stores anymore as music is either now downloaded direct from the Internet to MP3 players or ordered on CDs from places like Amazon.com. The Internet distribution channel won.
Hollywood Video where you went to rent videotapes and then DVDs? Surely you know about Blockbuster, also a video rental store, but now in bankruptcy with a good chance that all the stores will close. How about movie theaters? They’re still around and the most popular form of out-of-home entertainment. But guess what? Per capita movie attendance has been on a constant decline since 2002, down 22%. What’s happening? First Netflix came along where you ordered your DVDs on the Internet and a day or two later they arrived in our mailbox. Now Netflix lets you stream videos directly to your high-def television. The Internet distribution channel is winning again.
How about bookstores? Yes, we still have some around such as Barnes & Noble. The other big chain, Border’s, is in Chapter IX bankruptcy and closing many stores. What’s happening? Well first we had Amazon.com and similar websites where you found the book, clicked and two days later had the book at your doorstep. Then came the e-book electronic readers where you download a book over the Internet in seconds. The Internet distribution channel is winning again.
Remember the video arcade at the mall where you went to pay video games? There’s a few left, but you won’t find many video games there with the except of some driving/ride simulators. Most of the games are redemption games. Now we have video game consoles at home and play games on the Internet, on our computers or our smart phones. We still go to GameStop and other retailers to buy video games for our gameplayers, but how long will it be before all games are streamed over the Internet and the Internet again wins?
How about retail merchandise? With Amazon.com and other Internet sites, you don’t have to leave your home to purchase many items, and what you order often costs less. E-commerce is growing, significantly outpacing the growth of bricks-and-mortar retail sales. Forrester Research reports 2010 e-commerce sales were up 12.6% from the previous year and now make up 8% of all retail sales – 11% if grocery sales are excluded from the calculation. They project double-digit increases for the next few years, with e-commerce growing to 15% of all retail sales excluding grocery in 2015. The Internet won for me this past Christmas. I didn’t visit a single store to buy any gifts. In reaction to not only the drop in retail sales during the recession, but also the growth of Internet sales, many big box retailers are now shrinking the size of their new stores. The Internet distribution channel is increasingly taking market share away from retail stores.
Saving time and convenience, as well as the wide selection available with E-commerce, are all part of the equation that is shifting consumer spending away from bricks-and-mortar stores and destinations to Internet digital distribution. If you are a shopping center or mall landlord or developer, this is really scary stuff, as the result is that the total supportable square footage for retail and shopping centers is on constant decline.