Those Disappearing Consumers…

A recent article in The Week considered the phenomenon of the retail apocalypse–the sudden loss of thousands of jobs in retailing.

Employment in general merchandise stores has fallen by almost 90,000 jobs since October. Just like manufacturing jobs before them, brick-and-mortar retail jobs are finally falling to the twin forces of technology and globalization — this time in the form of Amazon and e-commerce. Or so goes the narrative.

And what, exactly, is inaccurate about that narrative? According to the article–which goes into considerable detail–it omits a key cause. The story being told “vastly oversimplifies what’s going on with retail.” And it completely misses a significant cause of the collapse: the loss of a once-reliable mass of consumers and the effect of that loss on retail stores.

Things get interesting when we pick apart what we mean by “retail.” Employment in department stores has bled 500,000 jobs since 200118 times the number of jobs the coal industry lost in the same period.

 

 

Recognizable brands like Macy’s and Sears are looking shaky: the former plans to close 68 stores and lay off 10,000 workers, while the latter’s business model has been rotting for years and may collapse altogether. Malls across the country — long the home of these department store chains — are dying and emptying out.

As the article points out, department stores and malls depend upon a sufficient number of middle-income consumers. And those consumers need to live pretty much everywhere.

If you’re going to have a mall with department stores in every decent-sized town, you need middle-class consumers in every decent-sized town, too.

That’s precisely the sort of consumer we’ve lost. For the last few decades, middle- and lower-class wages have stagnated, while the portion of Americans high up the income ladder provide more and more of all consumer spending. The national economy has also gone through a remarkable geographic shift, in which pretty much all new job and business creation occurs in major cities.

The article concedes the significant role of the internet in our shifting consumption patterns, but insists that the major culprit is the loss of good-paying jobs–some as a result of trade, but far more as a result of automation and misguided economic policies that have abandoned the mid-century focus on full employment–a focus that drove up wages.

The culprit–the reason those middle-income consumers are vanishing–turns out to be low wages.

In the past few years, we’ve learned that resistance to raising the minimum wage was  based on erroneous assumptions, mostly the argument that a higher wage would lead to fewer jobs. But job creation has actually improved in places that have raised the minimum wage.

What the old argument missed suddenly seems so obvious: When workers have more money to spend, they buy stuff. They consume. When they can barely make ends meet, they don’t go to the mall. They don’t eat out. They don’t browse at the department store.

There’s no doubt that the nature of retailing is changing. The Internet, Amazon’s same or next day delivery, the convenience of online shopping–all present a very real challenge to conventional retail trade. That challenge will require adjustment and innovation.

But first, you need customers with money to spend.

18 thoughts on “Those Disappearing Consumers…

  1. It is ground hog’s day with Springsteen’s lyrics:
    I was eight years old and running with a dime in my hand
    Into the bus stop to pick up a paper for my old man
    I’d sit on his lap in that big old Buick and steer as we drove through town
    He’d tousle my hair and say son take a good look around
    This is your hometown
    This is your hometown
    This is your hometown
    This is your hometown
    In ’65 tension was running high at my high school
    There was a lot of fights between the black and white
    There was nothing you could do
    Two cars at a light on a Saturday night in the back seat there was a gun
    Words were passed in a shotgun blast
    Troubled times had come
    To my hometown
    My hometown
    My hometown
    My hometown
    Now Main Street’s whitewashed windows and vacant stores
    Seems like there ain’t nobody wants to come down here no more
    They’re closing down the textile mill across the railroad tracks
    Foreman says these jobs are going boys and they ain’t coming back
    To your hometown
    Your hometown
    Your hometown
    Your hometown
    Last night me and Kate we laid in bed
    Talking about getting out
    Packing up our bags maybe heading south
    I’m thirty five we got a boy of our own now
    Last night I sat him up behind the wheel and said son take a good look around
    This is your hometown
    Songwriters: Bruce Springsteen

  2. So one more Republican myth is shattered. Higher wages do not reduce the number of jobs after all. Perhaps some of those economic geniuses in Congress (such as Paul Ryan) need to toss their copies of Ayn Rand’s books in the trash and start reading an Economics 101 book. Catering to the “one-percent” does not keep stores such as Macys and Sears open.

  3. And to solve this problem the Republicans, once more, as always, want to cut taxes for the super rich. Yes.. That should help. ?????

  4. “The culprit–the reason those middle-income consumers are vanishing–turns out to be low wages.”

    Having been part of the low-middle-income class for years; learning to make-do with what I had in hand, prepared me for the sudden drop to low-income class due to disability, and now old-age with the inability and no hope to improve my station in life. I will admit that the money my father left me allowed me to pay off my home; the small remaining “cushion” is dwindling due to maintenance on this old house but I am better of than millions of others. Since November 8, 2016, I believe we need to add fear as a culprit; we can no longer rely on maintaining even our low wages, Social Security and/or Disability income or our health care, the latter we have had and been paying for since long before the ACA became a possibility and then a fact of life for many.

    How many of the declining, once thriving, shopping malls and the current “big box stores” which drove out the “Mom and Pop” businesses, are soon to be a thing of the past where even our low-income can be spent to provide our needs? Washington Square Mall is a good example on the east side; a few months ago I stopped there looking for a hard to find item and found many vacant stores and dimly lit large areas throughout the mall interior. I cut through Burlington’s large, once bustling, department store and was actually afraid in some of the empty, closed off, darkened areas before finding my way to an exit. The huge parking lot for the mall is basically empty. Circle Centre Mall seems to be fading as a downtown mecca.

    I do order from Amazon at times; books primarily because bookstores are gone but also for some hard to find items. Computer hacking is becoming more than epidemic; how long will it be safe to trust on line ordering? While I am a Walmart shopper periodically to stock up on personal care and over-the-counter items; their book section offers little and the books written by and about politicians are almost all Republican based. There is now a scarcity of employee assistance throughout the store to find where they have moved entire sections of goods.

    But, yes, first all businesses need customers with money to spend and we are fast becoming an endangered species. I, for one, am afraid to spend the little I have due to fear of losing at least part of it and the escalating prices on everything to make up for the lack of consumers to maintain the 1%’s profit margin.

  5. I’m no economist, but I have said that starving the working class is a sure way to kill consumption and commerce. The rich get richer for a while but ultimately there are going to be fewer and fewer consumers supporting the wealthy.

  6. Yesterday, on NPR, the commissioner of the DHHS of Maine was being interviewed about her “firm belief” that Medicaid and social programs like it, are a “disincentive” to work. She was advocating for a work requirement to qualify. She discounted the fact that there are often, maybe always, fewer jobs available than those with the skills, both physical and mental to fill them.

    I Googled Mary Mayhew, only to find a supposed Democrat who received an award for outstanding work from the Heritage Policy Foundation for her work on taking down the social safety nets in Maine. Her actions in the areas of mental health services, recovery programs, food stamps, lead exposure, to name a few, are all aimed at saving the state money, period. She is a minion of one of most toxic politicians in the country, Paul LePage.

    In more sparsely populated areas of the country, finding a job at all may be impossible, because the behemoth that is Walmart has killed local small businesses. You have to wonder where all of those people in Maine who are kicked off Medicaid and other social services will find the required jobs so blithely touted when so many of those jobs are disappearing, especially in rural areas of that state.

  7. The gutting of the middle class has worked out very well for the wealthy. As we all know, they have managed to gain ever more wealth while we fall further behind.

    I actually think it will continue to work well for them. As our middle class continues to be gutted and consumers continue to reduce their spending, this will create a continuous pool of people for the wealthy to take advantage of. We have been sinking to a class of slavery that must accept low wages that don’t cover the cost of living.

    If the GOP succeeds at passing their plans to gut Medicaid, Medicare, SS and all of the safety net programs that have been helping the working poor in our country sustain life then we will see even more citizens involved in violent uprisings. It will become a nationwide movement that will involve people who used to be middle class. You can beat people down for awhile, but eventually they will reach a point where they are no longer willing or able to take it.

  8. Well, if you don’t like Neoliberalism’s economic policies of the last 40 years, you might want to steer clear of Trump’s policies which are doubling-down on the same flawed policies. Austerity for Americans while tax cuts go to the richest of the rich.

    “Sorry folks, but you’ll just have to pull up those boot straps a little higher!”

    Progressives have the solutions, but the Democratic Party is owned by Wall Street. They hire politicians to obstruct progressive policies. The media serves Wall Street, so they’ll be no help.

    I’m going to predict elevated political unrest. Maybe we need a draft to send all the idle youth to war killing Russians and Syrians. Protests and marches. Bigger protests and bigger marches…

  9. I grew up in a time when there were repair shops for just about anything that could be fixed – toasters, clocks, TV sets, clothing and shoes, jewelry, cars (the one kind of repair shop still going strong) and more. People even repaired, or darned, holes in their socks (my mom taught me how to do it, and I still have a darning egg). Then came the era of consumerism. If it’s broken, pitch it and buy a new one. Built in obsolescence became a thing. That’s when the shopping malls and big box stores began to pop up everywhere. Several factors have and will lead to the decline of those malls, including low wages, online shopping, and the shrinking middle class as discussed above. The recession of 2008 forced millions of people to become frugal spenders, and out of caution, they may continue to keep their money close even when things ease up for them. And as evidenced by Pinterest and our shameless decades of landfill-building, there’s a very popular movement to reuse/recycle. Anybody know where I can get my toaster repaired?

  10. Today; unlike the Oklahoma “dust bowl”, there is nowhere else to go in this country to find work at any level of income. Watch the movie, “The Grapes of Wrath” for a refresher course in Climate Change and bank takeover of the victims. The bank takeover of farms, homes and businesses made people like Bonnie and Clyde and John Dillinger folk heroes to the victims. We have no “folk heroes” or heroes of any ilk anywhere on our horizon; hope for “salvation” by impeaching Trump and replacing him with Pence is a pipe dream…and it will be no peace pipe.

    The question of the obvious peaceful acceptance of Trump in Saudi Arabia was answered today on MSNBC; quite simply, their laws against protesters result in beheading or amputation of arms as punishment. The questionable public acceptance of Trump giving Israeli intelligence information to the Russians was answered by their ambassador to the UN, they will continue giving our government intelligence information. I don’t accept that as truth but a ploy to encourage Trump to continue sharing whatever they pass along with the Russians. All of this is part of the economic system in this country; it feeds the 1% and starves the 99% as long as Russia is shoveling money into the current administration. Flynn pleading “the fifth” adds fuel to the fire but…can we trust the sudden Republican approval of the special counsel to investigate what we have heard and read for almost two years? It is, at probably at the highest levels in history, follow the money! The Republican’s promise of “trickle down” benefits is openly rushing uphill to the 1%. It may take awhile but there will be an end to all sources of current consumer dollars and we will see a 21st Century version of the dust bowl across this nation.

  11. We need to start changing the narrative that is Republican-speak. They are always talking about the “job creators” when they speak of business owners. The fact is that businesses are NOT the “job creators”, demand is what creates jobs. If we pursue their line of reasoning, the business owner who has no customers is a job killer.

    Frank Luntz has done a remarkable job teaching the Republicans to keep repeating phrases like that. When they become part of the vernacular, the “truthiness” of the phrases becomes confirmed in the minds of the voters. “Corporations are people” is another. Using their logic, since a corporation is actually an entity owned by people, if I am a person and I own my house, my house must be a person, as well.

    As long as we alllow them to control the narrative, nothing will change.

  12. Todd, your prediction is the same as I made in my 8:05 post. We agree that more unrest will be happening and it will include white formerly middle class people.

  13. Countries are the people on the field competing in the game. They are not the folks in the stand betting.

    We used to know that but the thought was washed from many brains by media covert advertising bought by oligarchs in order to install pre purchased politicians where they could sell the country.

    Can we undo the damage our apathy and inattention and lack of critical thinking wrought?

    No guarantees certainly but the stakes make is compelling to play our best game.

  14. It is not just Amazon and other new means of marketing that are emptying malls over America; it is, as I have repeatedly blogged, wage inequality, a phenomenon that has been with us for some four decades (as demonstrated during such period by no movement in median wages as adjusted for inflation). The two combined constitute a double whammy to retail employment, as Shelia has graphically illustrated. Some of such malls may be reconfigured to be warehouses for delivery purposes by the likes of Amazon, and some are beginning to keep their brick and mortar stores alive that also serve as Amazon-like delivery to customers, but those are results and not causes of the problem. The problem is both a result of new and more efficient delivery systems and wage inequality and in the long run it matters not how efficient such a delivery system is; the solution – though not to retail underemployment – but rather in terms of performance of the overall economy is to bring an end to wage inequality. People with no money don’t order goods and services; it is demand that makes the world go round in market economies, without which not much else matters. If you think that minimum wages should not be living wages because they don’t directly affect you, think again.

  15. The recent article in the Sunday Star, I believe, confirms the phenomenon Sheila noted. The article indicate that Simon’s malls are doing fine…because Simon quickly sells properties that are located in downward trending demographic regions. The properties they keep are where people have disposable income, e.g. Keystone Crossing and Fashion Mall. They are carefully watching Circle Centre and are encouraged by the downtown building boom. Bottom line, the ONLY shoppers are high end shoppers. No one else left.

  16. Sadly; the east side area where Washington Square Mall is barely “holding on” is fast becoming THE eyesore in that area. It is one of those facilities which could be put to many needed uses (private business, government, medical, social) before the deterioration makes it cost prohibitive to attempt. The old Eastgate Mall is a prime example on the east side; it does have tenants (IMPD and Prosecutor’s Office and a few small businesses) but the exterior still looks like an abandoned, deteriorating building.

    I have been trying to find the origin of the quote, “If you build it they/he will come.” but can find it attributed to the movie, “Field of Dreams”. I believe it is much older than that. I also believe that was the belief when Circle Centre Mall was conceived, planned and the plans brought to fruition. They came but they didn’t stay; moving a factory situation into the Mall to fill empty space and obtain rental income will not draw the businesses originally planned by the City and Simon. I worked with Jackie Schmidt whose financial genius built the financial basis of the Mall on the start-up funds loaned to the City by Simon…till Goldsmith moved onto the 25th floor.

    I have only visited the Mall once since it opened; had no interest in returning as it became geared to serve those high end shoppers and not providing “something for everyone” as was the original intent. I miss downtown Indianapolis when it did provide “something for everyone” with multiple options for shopping, dining and entertainment. There is also the current problem with lack of public transportation to get downtown from all outlying areas.

    To quote some of Gerald’s wisdom:
    “Some of such malls may be reconfigured to be warehouses for delivery purposes by the likes of Amazon, and some are beginning to keep their brick and mortar stores alive that also serve as Amazon-like delivery to customers, but those are results and not causes of the problem.”

    Is this where Circle Centre Mall is headed; was moving the Indianapolis Star “factory setting” the beginning? Could this be a solution for Washington Square Mall rather than becoming one of the largest abandoned buildings in Marion County…of which we already have too many?

  17. Looks like Montana GOP billionaire Greg Gianforte won the election and made news with a hasty remorseful apology contradicting his GOP handlers who initially asserted the reporter was at fault.
    Gianforte will now be sworn in by GOP Paul Ryan, or by whomever, and be seated as member of the U.S. House of Representatives. Watch for the jocular locker room ass-slapping.
    A Trump who brags about sexual violence and calls the press an “enemy” is now running the country. A legitimization of dangerous ideas about what it means to be a man was always going to be part of the package deal.
    Greg Gianforte’s grotesque assault on a reporter is one more manifestation of Trump culture. This is the country we live in now. Next – widespread unisex crotch-grabbing condoned by the Orange Ogre.
    Cicero: “O tempora, O mores!”

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