The US retail industry: How is online retail affecting brick and mortar businesses?

Fashion brand Forever 21 is the latest large-scale retailer to file for bankruptcy. Both luxury retailer Barneys New York and discount shoe store Payless ShoeSource have taken similar action in 2019.

Government data shows that while economy-wide measures have been improving since the Great Recession, the retail industry has stagnated, or in the case of brick and mortar stores, even worsened. Online retail, however, has consistently grown for the last two decades.

Here’s a look at datasets from three federal agencies that shed light on the current state of the retail industry.

Nearly one in 10 retail dollars are now spent online

In 2001, online sales made up just 1.1% of the total $4.3 trillion (adjusted to 2018 dollars) in retail sales nationwide, according to the US Census Bureau. In 2018, online sales made up 9.9% of $5.3 trillion in total retail sales.

Since the Recession, the retail industry has been growing slower than the rest of the economy except for two key segments.

Between the Great Recession in 2009 and 2017, the GDP for the retail industry nationally—measured as the value added by the industry, which in the case of retail is the resale of a product made by manufacturers—increased 15% from a recession low of $944 billion in 2009 (accounting for inflation) to $1.1 trillion in 2018, data from the Bureau of Economic Analysis (BEA) shows. The broader economy grew by a more substantial 18% during that period.

The BEA breaks the retail GDP figures into categories. General merchandise stores, including department stores and superstore chains, saw their GDP figures drop 3% from $152 billion to $147 billion. Meanwhile, two retail segments saw growth well outpacing overall GDP growth.

Motor vehicle and parts dealers saw their GDP value increase 47% since the recession in which two US auto manufacturers received federal financial help.

Nonstore retailers, meaning an array of businesses that don’t have (or aren’t primarily dependent on) brick and mortar locations, also saw growth. These include online retailers like Dollar Shave Club and meal subscription services like Blue Apron. It also includes website sales of big box stores like Walmart and Target. The GDP of the nonstore retailer segment grew by 61% between 2009 and 2017.

Total retail industry GDP

GDP by select retail categories

There are fewer retail establishments nationwide than before the Recession

The Census Bureau’s Statistics of US Businesses (SUSB), last updated with 2016 data, compiles a count of companies, excluding a few types including farms and those without any paid employees.

That data shows that the number of retail “establishments” — which differ from the term “firms” in that a chain firm may have multiple establishments or locations — dropped 5% from its 2007 high of 1.12 million to 1.07 million in 2016. Retailers of all sizes—except for those employing more than 500 people– experienced this decline. Those large retailers made up 28% of all retail establishments in 2007, compared with 32% in 2016.

Retail establishments by firm size

Retail employment has increased slightly compared with pre-recession high

Employment data from the Bureau of Labor Statistics shows that total employment in the retail industry stood at 15.8 million in 2018. That’s 10% higher than the post-recession low in 2010 of 14.4 million, and just 2% above the pre-recession high of 15.5 million in 2007.

Employment changes across segments of the retail industry vary. Between 2007 and 2018, furniture, electronics and appliance stores saw a 16% drop in employment. Nonstore retailers saw employment rise 30%, from 442,000 to 573,000.

Retail industry employment

Employment by select retail categories

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Sources

US Census Bureau, Annual Retail Trade Survey

US Census Bureau, Monthly Retail Trade Survey

US Census Bureau, Statistics of US Business

US Census Burerau, Statistics of US Business

FRED, E-Commerce Retail Sales as a Percent of Total Sales

Bureau of Economic Analysis, GDP by Industry

Bureau of Labor Statistics