by Wolf Richter, Wolf Street:
Stunning acceleration of a trend.
On the surface, it was the same lackadaisical data we’ve become inured to in this wondrous economy. But beneath the surface, there lurked a nightmare for the already struggling brick-and-mortar retailers.
Total retail sales in July, at $457.7 billion, remained stubbornly flat from June, and ticked up a measly 2.3% from a year ago, adjusted for seasonal variation and holiday and trading day differences, but not inflation, according to the Commerce Department.
As crummy as it was, it was propped up by sales of motor vehicles and parts, the largest category at 21% of total retail sales. They rose 1.1% for the month and 2.4% year-over-year to $93.2 billion. Auto sales have been booming. In terms of unit sales, they set an all-time record last year, funded by cheap debt and loosy-goosy underwriting standards; so comparisons this year are on top of a year that may be hard or impossible to beat for a while, with the industry already talking about a “car recession.”
And here’s what else propped up retail sales: Sales by “non-store retailers,” which includes e-commerce, soared 14.1% from July last year to $47.7 billion, now accounting for 10.4% of total retail sales. Their share has doubled since 2002.
So retail sales without autos and without non-store retailers – an approximation for brick-and-mortar retailers other than car dealers – came in at $321 billion in July not seasonally adjusted. A year ago, they were also at $321 billion. They have not moved one iota over the past year. And they’re up only 2% from two years ago.
That’s not counting the impact of inflation. CPI rose about 1% over the two-year period despite the collapse of energy prices. Adjusted for CPI, these retails sales might have gone up only 1% over a two-year period.
The US population grows at a rate of about 0.8% per year currently, according to the Census Bureau. So on a per-capita basis, and adjusted for inflation, these brick-and-mortar retail sales might have actually declined over a two-year period! A grisly thought for brick-and-mortar retailers: on average, each individual consumer might already be buying less there than they used to.
That non-store retailers have been kicking butt at the expense of brick-and-mortar retailers is by now well established. The entire brick-and-mortar industry is fretting about it. Big retail chains specialized in clothing and accessories are struggling with stagnating or now declining revenues. There has been a tsunami of bankruptcies by chain retailers. Mall owners are starting to worry about incessant store closings, including the 141 Macy’s stores; they’re beginning to bite. Eventually, the brick-and-mortar retail debacle will hit mall REITs and commercial mortgage-backed securities.
This has been a slow-motion development that had been denied for its first decade or so, as malls were considered something American consumers could not possibly live without.
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