What do Blockbuster Video, Circuit City, and Toys R’ Us all have in common? We’ll save you the anticipation and hit you with the answer: they all went out of business due to the Internet and the advent of eCommerce! Chances are, those three companies won’t be the only ones that close their doors in our lifetime. Right now, other retail companies like Macy’s (NYSE:M) and Nordstrom (NYSE:JWN) are also facing an uncertain future. However, this downturn in physical retail outlets isn’t indicative of a recession or anything of the sort. The fact of the matter is, physical retail stores keep closing, but eCommerce keeps growing…and there are no signs of it slowing down.
eCommerce Keeps Growing in Huge Percentages Year Over Year
Let’s take a look at the cold, hard statistics. The United States Department of Commerce issued a report on Friday showing that eCommerce in Q1 2019 increased 12.4% from Q1 2018 to $127.3 billion. That’s a huge number, considering that retail store revenue has been on the decline for well over the past decade. Here’s a graph taken from the report that shows Estimated Quarterly Retail eCommerce Sales as a Percent of Total Quarterly Retail Sales from 2009-2019:
Despite the steady increase, it’s true that eCommerce only accounted for 10.2% of total retail sales during the first quarter of 2019. Some may argue that a figure like 10.2% isn’t anything to cause a fuss about. However, this slope in the graph above clearly indicates that eCommerce sales will continue to gain more market share over time.
“eCommerce” Also Includes Online Sales from Brick and Mortar Outlets
When most people think of eCommerce, they probably only think of ordering an item off Amazon or getting their favorite subscription box shipped to them. However, it’s important to recognize that most of these huge retail corporations also rake in a massive amount of income from their online sales. Therefore, that means the companies themselves aren’t necessarily suffering—only their physical locations. Their revenue is simply shifting away from one stream and into another. At the end of the day, these companies are still making money (for now).
Some examples of corporations with thriving online sales departments are Walmart (NYSE: WMT), Home Depot (NYSE:HD), and Best Buy (NYSE:BBY). In reality, the stores most threatened by eCommerce are the classic “mall stores” such as Payless Shoe Source and J.C. Penney (NYSE:JCP).
Will Physical Retail Stores Eventually Disappear?
This is the question is at the forefront of everyone’s mind. As online continues pummeling brick and mortar, it’s easy to wonder if physical retail stores will disappear in our lifetime. Currently, the money it costs these companies to keep physical stores open far exceeds the revenue their stores generate. However, it’s probably unrealistic to assume they will ever fully go away. Some people will likely always value the experience of walking into a retail store and leaving with an item immediately. However, it’s impossible to argue against the trend. Even these major retail corporations are all beginning to shift focus to their digital storefronts. For now, it’s either adapt or die. Whether or not they all fully go digital and close their physical storefronts, only time will tell.