Retail—Shopping & Manufacturing

Non-traditional exterior of a SuperTarget, Jac...

Drive or walk? Carry crap?

Buying products (and services), are very important. Wide selection & competition are important. Being close is seen as great & offering many things, when in fact the offerings & benefits are minor. What’s the problem with big-boxes? Regardless, zoning doesn’t create. Businesses will construct when they think they will have consumers (for shopping, living, working, etc.). People are satisfied to shop at large stores (more selections, better prices, parking) and the free market lets other stores fold, if they can’t compete.

There seems to be some preoccupation with WalMart. People like to shop for many products, at low prices. That can be done at Kmart and Target too. In the recent past, it was done more often at Sears and other department stores. So what? Large stores have many efficiencies and advantages. Strip malls are endangered? Ridiculous.
Put peoples’ shopping into 6 categories:

  • 2.huge regional malls
  • 3.strip malls (~4 to 20 stores)
  • 4.big boxes
  • 5.small stores in hoods, mostly walk-ups
  • 6.stores in CBDs, many pedestrians, expensive parking

You think that will go down to 5?
People will only drive to large malls or downtowns?
Or for some, walk to stores?
Many people really value trunk space and even truck beds.
Retail space is overbuilt, so there will not be much added for many years.
Obviously people don’t live in big-box stores, nor is that even near a majority employer, so it doesn’t make sense that zoning only allows big-box.

US retail is ~20′sq./capita, high, so what?–partly because the US is wealthier. Retail sales per retail area might be relevant, indicating efficiency and lower overhead; however, there are many other factors.
Suppose there was slightly less retail space. People would still have the same amount of discretionary income. There would be higher sales per each store, on avg. Prices would probably be a little higher, because of less competition. On the other hand, leasing and other overhead costs could be a lower % of sales, but that would change the amount spent. Yes, there is a high retail vacancy rate now, because of over-building and the recession.

It is true that people should save more and use less credit. However, people aren’t forced to go shopping and don’t buy or over-extend just because there are many retail options. Large retail stores happen naturally, starting over a century ago. Look at the history of Sears and Montgomery Wards. Of course Wards couldn’t adapt. WalMart has outdone other retailers. It’s size and procedures have allowed it to offer an incredible array of products, at low prices. You are not going to find higher wages at competing smaller retailers.

A business model is not formed to fit zoning. Businesses want sales, for whatever products/services offered, obviously. So, companies build where allowed or change zoning to be allowed. Zoning can be made to attract or deter certain types of businesses/construction, depending if there is consumer demand. Suppose more “culture” is wanted and there is zoning to just allow that. Do you think that companies will start building museums, art galleries, music halls, etc.? No. There is not enough demand for those types of businesses to exist.

The average retail spent is about $10,000/capita. Do you really think that will vary by the amount retail available?
Large retailers and multiple outlets occur because that is more efficient (scale) and there is a large amount of capital, among other reasons. That is true for all developed nations. Look at chains in the G20 and even beyond.
How can there be too much consumption? Income has to be earned to be spent. Borrowing is another problem. Consumption, in retail, is buying tangible goods. Other than food and shelter, people like to buy “things” (entertainment too). People should have fewer “things”? How would you rather people spend? Why the hell is it your guys’ decision on how people should spend money?

How about driving to stores and trunk spaces? That is very convenient. Supermarkets need about 20,000-40,000 potential consumers within reach. When there are small food stores, there is much less selection and higher prices and often limited parking. I think you guys might be getting mixed up with the service sector, that has been increasing, while manufacturing has been decreasing, for decades. That’s true for all developed economies. You begin with consumption, then talk about exporting, which is production. Trade is great, look up comparative advantage. You guys are welcome to not buy imports and pay higher prices. However, there are many product types which are not made in the US, as well as foodstuffs. Labor unions can be thanked for that. Also, fungibles (commodities: oil, lumber) are indistinguishable.

Consumption is the largest part of the economy. GDP = C + I + G + net trade
GDP = private consumption + gross investment + government spending + (exports ? imports).
BTW, the trade deficit is not exactly that, the exchange has to even out, like barter; deficit for products though. That gap is money that other countries use to buy stocks and such, mainly US Bonds, which is financing the Federal Debt. Without that, interest rates would be higher, and more money would be printed–leading to inflation.
Malthusian thinking, how depressing. Although caution is good. The worlds needs negative population growth, like the natural growth of Japan and Europe (that’s not counting net migration).

About Randall
A contrarian, not for conflict, but because many decisions are made, without considering the full impact & consequences.

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