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Retail Apocalypse Can Lead to Suburban Renaissance: Noah Smith

The decline of physical retail will force the U.S. to rethink its entire idea of what a city is for.

(Bloomberg View)—As technology changes, a country’s industrial mix changes. A century and a half ago, most Americans -- and indeed, most human beings -- worked on farms. Today almost nobody does. Nowadays, a substantial number of Americans work in retail, ringing up purchases, stocking shelves or helping customers find what they need. But in a decade or two, it’s anyone’s guess as to whether brick-and-mortar retail will continue to dominate the urban, industrial and occupational landscape of the U.S.

Early signs point to “no.” The rise of e-commerce continues unabated:

Meanwhile, retail jobs are becoming rarer, with a falling share of the population working in the industry:

The decline of physical retail has received a lot of attention recently. A wave of store closures and bankruptcies this year has been described as a “retail apocalypse”:

There have been nine retail bankruptcies in 2017—as many as all of 2016. J.C. Penney, RadioShack, Macy’s, and Sears have each announced more than 100 store closures. Sports Authority has liquidated, and Payless has filed for bankruptcy. Last week, several apparel companies’ stocks hit new multi-year lows, including Lululemon, Urban Outfitters, and American Eagle.

Naturally, many people are worried that e-commerce is coming for their jobs. Given that it’s often difficult for workers to transition to new lines of work, this is a perfectly valid fear. But in the case of retail, I’m not that worried. Unlike manufacturing, where overseas competition in the ’00s derailed many Americans’ careers, retail doesn’t involve that many specialized skills. Usually it’s just managing people, talking to customers and doing routine work. Those are the kinds of skills that will transfer to other jobs. In other words, it doesn’t seem likely that out-of-work cashiers and store salespeople will be cast into lower-paying jobs or onto the welfare rolls for the rest of their lives. They can go into health care, food service or a variety of different service jobs at companies in many industries.

But the end of brick-and-mortar retail is certainly a concern, for a very different reason. Modern U.S. cities, especially the suburbs, are built around retail stores. If those stores evaporate into Amazon.com Inc.’s cloud servers, huge gaping holes will open up in the economic landscape of almost every suburb and town in the U.S.

Think of any suburban area you know. It consists mainly of houses, some apartment complexes, low-rise offices and strip-mall shopping centers filled with retail and restaurants. Now imagine if half the stores vanished, leaving large sections of every strip mall boarded up. First of all, the restaurants and bars that remained in the shopping centers would lose a lot of their customers. As of now, many people drive to shopping centers so they can do their eating and retail shopping in one place -- with retail gone, the fixed costs of driving to the local strip mall are the same, but the benefit is much lower. That would hit the bottom line of food and drink establishments.

Even worse, the empty, semi-abandoned strip malls could become centers of suburban blight. Vacant properties draw drugs and crime, cause fires, increase local violence and reduce property values in the surrounding areas. The retail apocalypse could make many suburbs look like they just suffered an actual apocalypse.

The decline of physical retail will thus force the U.S. to rethink its entire idea of what a city is for. Why do people live near each other, if not to shop at the same places?

One reason is to go out to eat. Even as retail has declined, restaurants and bars have been doing more business:

Another reason for people to cluster is to take advantage of schools, day-care facilities, hospitals and other local services. That’s not going away in the age of Amazon -- people like living near their friends and meeting new people in person.

So even if physical retail dwindles, urban and suburban living will not vanish. It will just change. Towns and cities across the country will have to consolidate into a more compact form, to eliminate the gaps left by vanishing retailers -- in other words, sprawl will have to be reduced. Strip malls will still exist, but they’ll be fewer in number. And preference for pedestrian-friendly streets will probably increase, since walking around is nicer when going out to eat than when buying a new vacuum cleaner.

Rebuilding the suburbs will mean a lot of spending at the local and state level. But perhaps that’s not such a bad thing. Working-class Americans need jobs, and this sort of epic construction project would create a lot of them. If the retail apocalypse leads to a suburban renaissance, maybe it’s something to be relished rather than feared.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Noah Smith is a Bloomberg View columnist. He was an assistant professor of finance at Stony Brook University, and he blogs at Noahpinion.

To contact the author of this story: Noah Smith at [email protected] To contact the editor responsible for this story: James Greiff at [email protected]

For more columns from Bloomberg View, visit Bloomberg view

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