How Stores Could Survive the ‘Retail Apocalypse’

Talk of a “retail apocalypse” has swept American media in the past decade, with the dramatic expansion of high-speed home internet and e-commerce sparking concern about the future of brick-and-mortar stores in the United States.

But are we really looking at a decisive shift in the retail landscape, or have reports of the demise of the mall been greatly exaggerated? Research from Arizona State University’s Uyen Tran (a graduate of Chicago Booth’s PhD program), who studied the rise of e-commerce, finds that some past changes in retail have been slow and steady rather than fast and furious. Her study offers some ideas for retailers.

Tran analyzed millions of purchases of everyday consumer goods from 2004 through 2019 using NielsenIQ Retail Scanner Data housed at Booth’s Kilts Center for Marketing. Focusing on consumer packaged goods—a sector that accounts for nearly half of retail sales and includes items such as food, beverages, and household supplies—she studied purchases across 900 product categories and more than 40,000 brands.

She finds that as broadband rose 44 percent during the study period, household visits to individual brick-and-mortar stores declined by 17 percent, and the total number of trips fell from 170 to 146 a year, a drop of 14 percent. Meanwhile, the share of online spending increased from 1 percent to 4 percent—modest growth from a small base.

Average household spending at physical stores remained stable, rising slightly from about $7,100 in 2004 to $7,500 in 2019, yet Tran also estimates that there was roughly an 11 percent decline in offline spending. These findings aren’t inconsistent, she explains: The raw-spending trend reflects the growth of broadband but also many other forces including inflation, income growth, shifting demographics, and broader macroeconomic conditions. The estimated spending drop—calculated using a long-differences analysis, commonly used to study the long-term effects of an intervention or shock—suggests that broadband had a meaningful but not wholesale effect on offline spending, she says.

Even though there were signs of modest declines in shopping trips and unique retailers visited, there was scant evidence in the research of a large-scale shift away from brick-and-mortar purchasing for everyday household essentials.

Although Tran’s study period preceded the shopping disruptions of the COVID-19 pandemic, the findings offer some general guidance for how retailers can respond to changes in shopping patterns.