My kids (ages 12 and 7) wanted to go shopping on Black Friday, so I took them as part of our weekly male bonding ritual.  The first store we went to was Toys R Us.  When we first moved here four years ago, they used to tape a long path on the floor to the cashiers that wrapped all the way around the main aisles of the store (we didn’t stay, obviously).  This year, there were two cashiers and there was one lady in front of me when we got on line.  In other words, in four years, the line went from being hundreds of feet long to just five feet long.  When I got home, the Toys R Us CEO was out saying that early signs point to slower growth for them.  You don’t say.  That’s pretty bad, in a year where there is a new Star Wars is coming out.  This similar (but not as bad) tale was repeated at Best Buy, Target, Walmart and Sprint – not a lot of people shopping.  The longest line I saw all day was the cell phone line at Target which had maybe 7 people waiting for a $250 gift card on the iPhone.  Now part of this could have been the weather… it was drizzling on and off.  I’m not going to make much of a one day – it’s just a sample size of five stores in one area of the country.

 

However, I do think this highlights the brick-and-mortar to internet shift in retail that has been going on for some time now.  Ecommerce has a lot of advantages:

  • Who wants to schlep outside in the rain to shop?  While there were no crowds on Black Friday, you can sometimes run into traffic, both in and outside of the store.
  • Some of the things my kids wanted weren’t there.  But you can always find it on the internet.
  • Some stores, like Target and Walmart match major online competitor’s prices.  But there are many stores that do not.
  • It used to be that you needed brick-and-mortar for instant gratification.  Amazon now has free 2 hour shipping on some items – 1 hour shipping if you want to pay $8.

 

On the way home, we passed by the local Barnes and Noble.  And this is the classic example of why we have a shift from brick and mortar.  I like books as much as the next guy, but I can’t remember the last time I bought a book there… why would I waste an hour of my day looking for something that may not be there and pay 50% more for something I can get instantly on a tablet (or have someone deliver to my house)?

 

The whole point of this is not to give some kind of Consumer 101 lesson, but to discuss this from the point of view of the economic data.  As we keep progressing from a brick-and-mortar economy to an ecommerce economy, you can expect some of the “fat” to be continually taken out of the distribution system.  I had previously discussed something similar in my “disintermediation” post a few weeks back.  This translates into lower GDP, all other things being equal.  It also shows up as lower retail sales and spending.  Last week, Consumer Spending came in at 0.1%.  Does this mean consumer spending is weak?  Maybe.  But it’s also possible consumer spending is strong, but people spend money more wisely… like not going to Barnes and Noble.  It used to cost me $80 to fill up my car a year ago.  Now it costs me less than $35.  Instead of spending money on a big cable TV package and multiple cable boxes, I cut back and added Netflix and Amazon.  If I spend 33% less on the same book or 70% less on the same amount of gas, or 25% less on better TV content, am I retrenching?  The data can only capture so much.  I’m not saying we should embrace weaker retail/consumer data.  But you have to put the data in the context of shifts within the economy.  To be continued.