According to a new report by the International Council of Shopping Centers (ICSC), up to 73,000 brick and mortar retail establishments could close in just the first half of 2009.
The ICSC says there was a net loss of about 33,000 retail establishments in 2008.
In making its prediction for 2008, the ICSC pointed to the national chains like Sears and Talbots, which already announced plans to close hundreds of stores, as well as the bankruptcy or liquidation of big chains like Circuit City, Linens’n Things, Mervyn’s, Bombay Co, KB Toys, and the Sharper Image.
As more and more brick and mortar stores close, sales on the net are bound to increase.
But maybe the opposite is true.
Maybe the Net is killing the brick and mortar retail channel.
Just like it is virtually impossible for a small store to compete with Walmart when they open in the same town, due to Walmart’s buying power, they can price their goods well below a mom and pop store or a small chain, how can a brick and mortar store compete with the Net?
With the lousy economy shoppers are ever more price conscience.
So in reality how can a Linens’n Things compete with a site like our’s LuxuryBedding.com?
My rent is $7 a year.
Their rent per store, is tens or hundreds of thousands a year depending on each location.
I have no employees, no insurance, no utilities, no inventory, no nothing.
So what that allows us to do is sell the same or better products, at wholesale plus a 20% markup.
The typical brick and mortar store sells with a 100% markup. They buy a product for $50 from the manufacturer and sells it for $100. That same product would cost $60 on our site. So the retailer would have to discount the product by 40% just to compete dollar for dollar with us, but they have all those fixed costs. So while stores sell their products at 60%, 70%, and even 80% off, they are losing money on each sale, simply liquidating their inventory and slowly putting themselves out of business.
Now take Luxurybedding.com and multiple that by the hundreds, no thousands and thousands of sites just like it, that you can comparison shop from your house, for the same Calvin Klein satin sheets, across thousands of sites, in a matter of minutes to find it at the lowest price. Not to mention, the fact (living in Florida we tend to forget) that is pretty f–king cold in most places during the busiest part of the holiday season (80 degrees here today, sorry northerners) and its a lot nicer buying your bedding off the computer and having the UPS guy drive through the snow and ice to get to you, than you having to do it.
Sure our site is a VERY small example of what your seeing in the world of retail, but the more you look at the numbers and study the economics, you have to reach the inevitable conclusion that brick and mortar model is largely doomed and it has the internet to thank.