Issue #189

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This is issue no. 189. The last issue had a 🔥 48.79% open rate with an additional 5.18% of you going back to this article by NPD's Matt Powell on how the sporting goods industry is making mistakes that we've seen before.

An intro to today's last word:

While the Great Recession halted much of the unsustainable expansion of retail space that has steadily diluted retailers’ sales per square foot averages, the U.S. remains overstored. In a recent report, CoStar Group contended that nearly 1 billion square feet of U.S. store space must go by closing stores, converting retail space for other uses or reducing rents. 

Green Street Advisors last year suggested department stores must close hundreds of additional locations in order to recapture previous levels of productivity — action that could decimate malls. That would bring the number of malls closer to what they should be according to J. Rogers Kniffen Worldwide Enterprises founder-CEO Jan Kniffen, who said last year that while there are some 1,100 enclosed malls in the U.S., the number should be closer to 700. - Daphne Howland

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Mall anchors are preventing their landlords from revamping malls. And some see the opportunity in shorting bonds tied to lower-tiered malls

More in today's (ok, tonight's) last word. Apologies for the late email, I hope that you enjoy!

Today's Top Intelligence (12 Reads)

One of the early subjects of 2PML was the likelihood that platforms would develop digitally native vertical brands to compete against powerful fashion incumbents. Here is the best example of this, thus far. Amazon's low-cost intimates brand is due to compete against the likes of Victoria's Secret and their L Brands sister, La Senza. 

Last Word: The Great Retail Divide

Bloomberg's Shelly Banjo brought this graph to my attention today.  The most dramatic point is the steep decline of retail business beginning in Q3 of 2008, coinciding with the great recession. The y-axis is pretty damning, upon inspection. While some argue that eCommerce is but 9% of all retail sales, this illustration tells the real story. Department store retail and its associated real estate are at recession levels of activity with no recovery in sight. Additionally, department stores have suffered from negative growth for the majority of the last 10 years. eCommerce has enjoyed 6-12% growth YoY during that same time period. 

I'm no economist but as I've mentioned in "House of Cards" (Issue 179), a mass default of second and third tier malls could potentially move us towards the commercial equivalent of 2007's housing bubble. While that would be an incredibly negative period for most of America, it's this type of event that would lead to mass adoption of eCommerce, out of sheer necessity. I define that as a jump from 9% to 25% before 2020.

Much like China's progression, where 89% of tier one city inhabitants shop online, the country's reliance on eCommerce wasn't solely software-driven. The swift adoption was influenced by lacking brick and mortar retail opportunities and an increase in eCommerce shipping and logistics real estate.

To keep up with increasing demand from smaller urban and rural areas, online retailers are seeking to expand logistics infrastructure and services. For example, Alibaba’s logistics arm, Cainiao, now owns 180,000 express delivery stations for the shipment of products and has recently expanded its fresh food distribution centers across China. The firm recently completed its first external funding round and is expected to spend $16 billion over the next five to eight years to expand its network. (Economonitor)

As department store retail sputters in much the same way that print media has, it will provide us opportunities to accelerate towards the mass adoption of the next 40 years of American consumerism. 
- @web