American Retail, Lost In The '80s

The 1980s were, in one sense, the peak era of American retail.  Not in variety of goods, or reasonableness in pricing, or in customer service that truly put the customer first.  It was the peak time to buy and consolidate existing retail businesses, while building more and more retail space, primarily in malls, for the dwindling number of businesses that resulted from the consolidations.

What was fueling all of this activity?  Was it consumer spending?  Hardly.  Despite glowing assessments of the '80s as a boom time for the American economy, the fact is that the decade was the very beginning of the wage bust that has, in the Age of Trump, reached its mature (or, if you will, most degenerate) phase.  True, people spent--but only so that they could look as prosperous as they thought everyone else was.  And, of course, they did it the old-fashioned way--by going deeply into debt.  Which is why the real economic boom of the '80s was the one enjoyed by bankruptcy lawyers concentrating their practises in consumer credit.

On the other hand, bankruptcy lawyers who focused on failing businesses made out well, too.  Because all of that consolidation and building was also fueled by debt.  Businesses were grossly over-valued, mergers were consummated based on the belief that the resulting behemoths would generate enough cash to service the debt, and costs were simultaneously expected to be driven down by virtue of the sheer size of the debt as a kind of fiscal sword of Damocles.

This approach may arguably have worked, after a fashion, for a period of time.  But it slowly began to fall apart by the end of the decade, as tapped-out consumers slowed down their spending and, in short order, the revenue was no longer enough to pay for the debt service.  Despite this, and despite the continuing decline in consumer income, businesses continued to follow this path to ruin, for themselves and customers.

And then came the World Wide Web, and the rise of Web retailers--Amazon, above all.  Suddenly, there were all of those brick-and-mortar consolidations, with too much debt and not enough differentiation among the handful of merger survivors to successfully compete with their upstart digital counterparts.  Internet retailers could (and do) provide greater variety and convenience, as well as superior service.

That is precisely why neither this article, nor this one, should be particularly surprising.  The truth is that we need less storefront space and more spaces for distribution centers.  And we need more retailers that are properly capitalized, with an acceptable and more traditional debt-to-equity ratio, so that they have the funds needed to adapt to rapid changes in a rapidly-changing marketplace.

Get out of the '80s and onto the Web, retailers.  That's where the action--and the money--is.