Newspaper article St Louis Post-Dispatch (MO)

As Online Shopping Intensifies, Outlook Dims for Mall Stores

Newspaper article St Louis Post-Dispatch (MO)

As Online Shopping Intensifies, Outlook Dims for Mall Stores

Article excerpt

WASHINGTON * Online shopping is reaching such a critical mass with U.S. households that many of the icons of the traditional mall from Macy's to The Gap and J.C. Penney face an increasingly uncertain future.

A government report Friday suggested a modestly healthy consumer, with retail sales up 1.3 percent in April. Americans are eating out more at restaurants. They're buying more cars. But the main beneficiaries of spending in the past year have been Amazon, eBay and other internet behemoths.

Spending at these nonstore retailers shot up 10.7 percent from a year ago, the government said in a week when earnings reports showed disturbing drop-offs at Macy's, Kohl's, Nordstrom and J.C. Penney.

Shoppers who once crowded malls are now ordering on phones, computers and tablets, siphoning sales from physical stores, which face growing pressure to reinvent their businesses.

"Online is cannibalizing the store business," said Marshal Cohen, chief industry analyst at the NPD Group.

The magnitude of the change may be just beginning to intensify. Online shopping has attuned customers to focusing on price and hunting for the best bargains, thereby shrinking profit margins at many stores.

Retailers have responded by shuttering stores to cut costs, leaving more shopping malls and plazas empty. The result has been a painful upheaval in an industry that employs 15.9 million people.

Online, in the meantime, has been catching up to the general merchandise stores that range from Wal-Mart to Nieman Marcus.

Back in 2000, for every dollar spent at physical stores, just 30 cents were spent online and at mail-order houses, according to government figures. Now, the online category makes up nearly 70 cents for every dollar spent at general merchandise stores.

"We have yet to learn the ramifications of just how paramount these shifts in consumer behavior are," Cohen said. "This is a cultural shift from the younger generation that is only going to carry forward."

The April retail sales report from the Commerce Department showed uniformly solid growth. It assuaged concerns that an economic slowdown in the first three months of 2016 might have significantly disrupted consumer spending.

The gains weren't just online. Though internet purchases rose 2.1 percent from March, auto sales jumped 3.2 percent. Clothiers, restaurants, sporting goods stores, grocers and gas stations also posted gains.

Only building materials stores suffered a monthly drop, but their annual sales growth was solid.

Though sales at department stores edged up slightly, they've sunk 1.7 percent over the past 12 months. The shift online points to more disciplined consumers whose collective habits can reshape sales. Impulse buys make up 45 percent of store purchases, for example, but only 23 percent online, according to research at the NPD Group.

At the same time, the improving economy has yet to fully relieve the financial pressures on many Americans. …

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