Along the cobblestone streets of SoHo, Chanel handbags and Arc’teryx jackets are displayed in shops like museum pieces, harking back to the height of the neighborhood’s trendiness. But rents there are softening, and the number of vacant storefronts is rising.
Today, some of the most sought-after real estate by retailers is not in SoHo, but five miles away in Red Hook, a gritty Brooklyn enclave with a shipbuilding past. E-commerce merchants are vying to lease part of a huge warehouse space, spanning 11 acres, that would allow them to deliver goods the same day they’re ordered online.
The profound reordering of New York’s shopping scene reflects a broad restructuring in the American retail industry.
E-commerce players, led by the industry giant Amazon, have made it so easy and fast for people to shop online that traditional retailers, shackled by fading real estate and a culture of selling in stores, are struggling to compete. This shift has been building gradually for years. But economists, retail workers and real estate investors say it appears that it has sped up in recent months.
Between 2010 and 2014, e-commerce grew by an average of $30 billion annually. Over the past three years, average annual growth has increased to $40 billion.
“That is the tipping point, right there,” said Barbara Denham, a senior economist at Reis, a real estate data and analytics firm. “It’s like the Doppler effect. The change is coming at you so fast, it feels like it is accelerating.”
This transformation is hollowing out suburban shopping malls, bankrupting longtime brands and leading to staggering job losses.
More workers in general merchandise stores have been laid off since October, about 89,000 Americans. That is more than all of the people employed in the United States coal industry, which President Trump championed during the campaign as a prime example of the workers who have been left behind in the economic recovery.
The job losses in retail could have unexpected social and political consequences, as huge numbers of low-wage retail employees become economically unhinged, just as manufacturing workers did in recent decades. About one out of every 10 Americans works in retail.
“There is a sea change happening in the retail industry,” said Mark Cohen, a former executive at Sears, who now runs the retail studies program at Columbia Business School. “And that is bringing a sea change in employment.”
Store closures, meanwhile, are on pace this year to eclipse the number of stores that closed in the depths of the Great Recession of 2008. Back then Americans, mired in foreclosures and investment losses, retrenched away from buying stuff.
The current torrent of closures comes as consumer confidence is strong and unemployment is low, suggesting that a permanent restructuring is underway, rather than a dip in the normal business cycle. In short, traditional retail may never recover.
The reordering should come as no surprise to anyone who has enjoyed the instant gratification of receiving that book or garden hose within 24 hours of ordering it. Or to anyone who has encountered the tired-looking mannequins…