With the boom of e-commerce in recent years and prolonged shutdowns of brick-and-mortar retail stores in the earlier days of the pandemic, the reigning thought has been that in-person shopping could slowly die out. But, is this assessment premature? In this segment of Backstage Pass, recorded on Nov. 29, Fool contributors Jason Hall, Toby Bordelon, and Rachel Warren discuss a compelling study by the National Retail Federation and the future of retail as we know it.
Jason Hall: This was a really interesting story. I've seen versions of it going on for a little while now. More and more retail stores are being opened than are being closed. It didn't feel that way for a long time. For three or four years it seemed like all the headlines were retail stores are closing, the retail apocalypse.
The latest from the National Retail Federation said the U.S. retailers have announced twice as many store openings as closings this year. That's awesome. I mean, it really is, from a lot of different angles that's pretty awesome. Let's just share our takes on this, I think might be the best approach, Toby, how about you kick us off?
Toby Bordelon: Yeah, so I think, I think it's actually good news for retail generally. I don't think it's necessarily bad news for e-commerce though. I think one thing we're seeing is more discount and warehouse store openings.
That you could look at that and say, "This points to a more price-conscious consumer." Which isn't great. But it's not just that. One thing we're also seeing is digital-first brands are opening up bricks-and-mortar stores.
Warby Parker's one who's doing this, they've been doing this a lot. Really growing out their footprint. Others are doing this as well.
It suggests to me when you look at all these openings that, there's this idea that consumers still want to shop in person in some ways. They're happy to do that if the experience is a good one. Looking forward, I think online paired with a smart, targeted physical retail presence is probably going to be the future for many retailers. That's what it looks like to me.
Rachel Warren: This was really interesting. This topic is based off this study by the National Retail Federation. I think it's good news for retail in general. I don't think that it's the death knell for e-commerce. What was interesting about the study from the National Retail Federation was that you look at, where are we seeing the most openings of brick-and-mortar retail stores?
According to the study, dollar stores, discount stores, off-price and warehouse clubs were the opening leaders. Stores like Dollar General and Five Below, for example, and auto-parts retailers were also noted as companies that were opening aggressively physical locations. I think one thing that's important to note from this study is that it's not necessarily that we're seeing these trends all across the retail landscape.
It's been very specific areas where shoppers might be more inclined to go in person. I don't know that you think of people necessarily shopping a lot online at discount stores. It's fun to go in person in some of these places and grab little gadgets for an affordable price.
Then in terms of auto-part retailers, that's obviously something that you're going to be more inclined to go and check out in-person as well. But I was researching this a little bit, and I found this interesting study by a company called Radial entitled Retail 2025 Shopper Study. It was essentially talking about all of these different trends that are going to be driving the retail landscape by and as of the year 2025.
One of the points that I found really interesting in the study was that one of these trends will be digital shopping growing while malls and stores decline. According to the study, shoppers are spending more time shopping online and using their smartphones and less time shopping in stores or malls.
That's not a huge surprise. What's interesting here though is that the study said that the youngest shoppers aged 15-17 are more likely to shop in stores or malls compared to older shoppers. This is an interesting finding because this generation may be the one who will bring back the popularity of in-store and mall shopping in the years to come. I was personally surprised by that. I thought that was very interesting.
Another trend that was noted in the study was that not only are all shoppers more tech savvy than ever before, but retailers' best shoppers, their most frequent and biggest spenders, are also the most tech savvy because they are the most enthralled by the next big thing and most attractive new experiences. The takeaway here is, you're definitely seeing in very specific sectors, a growth of in-person retail. It might be interesting to see how the younger generation could contribute to this in the coming years. But I think at the end of the day, online shopping is still going to be leading the way in terms of the most retail sales that we're seeing.
Hall: Yes, it's interesting. There's some good and bad of this more broadly. I think the obvious, overall aspect is that it is definitely positive. It's also a reminder that we are social creatures, going out and doing this activity with other people and around other people is a pleasurable thing for a lot of folks. Husbands of the world unite. No, it's terrible. It's not. That's just a fun caricature that we use.
But at the end of the day, I think a lot of shopping is going to continue to be in person. Even things that we could do online, we'll continue to do in person. It's just the stuff that was just superfluous and a little bit redundant. Let's be honest. What was Sears anymore? It lost everything.
JCPenney, K-Mart, so many of these other retailers, there was somebody else there was better, somebody else that either they had a better cost advantage, they had better selection, better service, better location, there was somebody that always did it better.
They went away because they got out-competed. Part of that was e-commerce. But I also I think it's good to remember, like Toby you were talking about it, a lot of Shopify's biggest customers, they either operate physical retail stores or they count on physical retail stores for the bulk of their business. Omnichannel is the word here, it's part of a greater strategy.
That's really important to remember about this. The part of it that is a little concerning is that the growth of the dollar stores like the Dollar Generals of the world, a lot of that has happened in areas that have become retail deserts. You know why Dollar General is now able to have a pretty thriving and growing grocery business?
They have coolers and freezers in their stores now because they're opening in places where there are no supermarkets. It's terrible. [laughs] It's great that the company is leveraging that opportunity to serve people in those areas, but there's just a part of it that I still get frustrated with because it means that there are people that don't have access to the same quality of retail supermarket experience that a lot of us take for granted.
That's my little social bug that I want to get in there that's a little bit frustrating with me about that.
