The retail landscape has been changing dramatically, with more people buying goods online, even before recent events. Recently, retail hit a milestone with more Storefronts selling services than those selling products and clothing.

Some Figures

Between 2002 and 2017, service-based retailers increased by 20.5%, adding 1.2 million spaces. Within the same period, retailers that sold goods dropped by 4.5%, which is 1.1 million shops. This data comes from JLL, a commercial real estate services company.

Thanks to these changes over the years, service tenants account for 52.6% of the retail space in the United States. Companies that only sell goods account for 47.4%. By contrast, the latter figure was 53.2% in 2002, but it has been steadily declining.

The service establishment categories that have grown the most include restaurants and drinking, followed by personal and laundry services. From there, telecom carriers and fitness and recreational sports follow. Amusement arcades also have seen mild growth from 2002 to 2017. Interestingly, movie theaters saw a slight decline, and repair and maintenance had a more substantial drop.

Online Shopping Is the Reason

Most of the shift from storefronts selling goods to those selling services comes from the rise in online shopping. In today’s world, it is incredibly easy to purchase nearly any products online, but the same cannot be said of services.

In the age of online shopping, many retailers have struggled, with Barneys New York, Pier 1 Imports, Forever 21, Charlotte Russe, and Charming Charlie all filing for bankruptcy.

Additionally, Amazon has taken away a lot of business from physical storefronts. In 2019, Amazon’s share of the United States’ e-commerce sales was 37.3%, and data indicates it will reach about 38.7% for 2020.

Big box stores, such as Target and Walmart, have also seen shifts as their customers lean more towards online shopping instead of doing so in-person.

How It Has Changed Retailers

Because of the shifting market, many retailers have started trying temporary formats that are smaller. The pop-up industry has an expected annual sales estimate of $50 billion, according to predictions from March.

Services Cannot Be Recreated Online

The big difference between the services and goods in storefronts is whether they can be translated into online. You cannot dine out at a restaurant or have a drink at a bar from your smartphone, but you can order groceries online. You cannot visit a beauty salon online, but you can shop for new clothing.

Source:

https://www.cnbc.com/2020/03/11/retail-milestone-service-providers-outstrip-traditional-retailers.html

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