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Show Me the Money
As always, retail sales in Connecticut follow population shifts.
But do bricks-and-mortar stores have a future?
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Business New Haven
5/1/2000
By: Michael C. Bingham
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As people earn more, they spend more - right?
For better or worse, that's true - especially among Americans, who have among the lowest rates of savings in the developed world.
With a booming stock market and personal wealth at an all-time high, we are indeed ringing up cash registers at a record clip. And area retailers are most appreciative.
What's changing, however, is what we're buying, where and how we're buying it - and what it all portends for the future of retailing.
It's no secret that Connecticut's cities' traditional role as retail centers has gone the way of the five-and-dime store. The hub of retail activity has shifted from downtowns of all sizes to suburban retail strips in places such as the Post Road in Orange and Milford, as well as big-box clusters off interstates in North Haven and Branford, with their convenient (and free) surface parking lots.
The accompanying chart illustrates this phenomenon, with a one-time bedroom community such as North Haven outpacing the state's first, third- and fourth-largest cities in FY 1998 retail activity.
But it's not the state's cities alone which are declining in retail importance. In the mid-1990s, sales in the more densely populated inner-ring suburbs such as Hamden and West Haven were flat or grew little, reflecting continued population and wealth flight from urban centers to previously undeveloped areas.
Where the Money Is
Of course, to spend money one needs disposable dollars, most accurately measured by effective buying income (EBI). And with its highest-in-the-nation per-capita income, Connecticut residents boast formidable EBI numbers, as well, ranging from a 1995 high of $27,395 per person (not household) in Fairfield County to a low of $15,513 in rural Windham County - still outpacing a U.S. average of $14,965, according to Sales & Marketing Management.
Average EBI for New Haven County was $18,018 by the same yardstick, while the figure for Middlesex County was $19,872.
So changes in retail spending patterns tend to follow population shifts - but only to a point. A little-noticed phenomenon in Connecticut is the growth in numbers of new businesses targeting consumers in the cities - everything from boutiques to specialty grocers to businesses providing financial services to consumers the banking industry has largely abandoned. Having grown in number for four years running, new business registrations with the Secretary of the State's office reflect this little-remarked-upon trend.
As well, retail establishments play a powerful employment role in the state's cities, providing jobs and reliable income streams for workers the technology revolution may have left behind, or those being weaned from public assistance under the Rowland administration's welfare-to-work initiatives.
A Changing Industry
Moreover, as an industry, retail remains a robust player in the Connecticut economy. In 1994 more than 21,000 retail businesses provided jobs to more than 260,000 workers, according to the U.S. Bureau of the Census. A plurality of those workers toiled in mid-sized retail establishments (ten to 99 employees).
Also, in current dollars retail in Connecticut generates nearly three times the revenue it did just a quarter-century ago, according to the U.S. Bureau of Economic Analysis.
Retail employment in the state may have peaked in the Reagan salad year of 1988 (reaching nearly 286,000 workers). But even as their numbers have declined, retail workers have generated more per-capita sales: The productivity of industry employees grew by a third from 1982 to 1994, from $21,837 to $28,110 in so-called "chained" 1992 dollars. And Connecticut retail workers are more productive than their peers in the rest of New England ($24,657) and the nation ($24,428).What We Buy - and How
Sea changes in what Americans are buying - and, especially, how they are buying it - are likely to transform the retail industry dramatically - and permanently.
Nationwide, the retail industry has been blindsided by shifts in buying habits, especially among baby-boomers now largely at the peak of their earning power.
Apparel sales are in retreat. U.S. consumers now spend more on enhancing their homes than on high-priced clothing and accessories. That's bad news if your stake is in fashion retailing, manufacturing or designing. Conversely, it's great news if you ride the supply chain of home-oriented merchandise.
The gap between spending on apparel and home furnishings had narrowed for years. Early in 1998 the two curves crossed. Since then, consumer spending on home merchandise has steadily raced ahead of spending on wearables.
Fueling the trend are:
• Demographics. Aging boomers, many now empty-nesters, spend to turn their homes into showpieces of wealth while no longer feeling the need to make strong fashion statements.
• The boom in home sales and construction - more than 5.5 million housing units were sold nationwide last year - including in Connecticut.
• A shift to more casual clothing across all age lines.
• And a vague but palpable new sense - even among the wealthy - that it's chic to bargain-shop for clothing.
The Death of Retail Stores?
The biggest question of all, however, it's not about what consumers are buying - it's whether in the future we'll leave our computers to shop at all.
Even in the years leading up to the e-commerce explosion and paced by time-starved boomers and Gen-Xers, American consumers have already begun to vote for convenience - with their feet.
Already discounters and off-pricers have gained enormous market share at the expense of department stores - many of whose chain owners have suffered through a horrendous spring season. Most present themselves attractively and feature huge good quality merchandise assortments, all at low prices. They are also easier and faster to shop than big malls - a key incentive for two-earner households with kids. "No-questions, price-driven stores thrive at the expense of traditional department stores," asserts the April issue of Barnard's Retail Trend Report. "Don't expect this to change." By this logic, perhaps Mayor DeStefano would do better to target Xpect Discounts - not Nordstrom's.
The bigger issue, of course, is whether there will be any stores at all in a half-dozen years, as consumers embrace the convenience and value of shopping online. To hedge their bets, many large retailers are forming Internet-based alliances: In March, K-mart and Target were among 11 major retailers which announced the formation of a Web-based worldwide exchange aimed at reduced buying and operational costs - and, of course, selling to a wider audience.
What does the e-commerce revolution mean for consumers? No one yet knows for sure. It may be, as Yale School of Management professor Ravi Dhar speculates, that bricks-and-mortar retail establishments will survive - but only for consumers without online access. And these shoppers - much like present-day urban consumers without access to an automobile - will surely pay a premium for their dearth of choices.
That's capitalism for you.
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