Greedy While Others Are Fearful / Part I: Undeterred by COVID-19, Large-Format Retailers Keep Growing
Medium boxes. Big boxes. Even bigger boxes. Economic development professionals have long taken a special interest in large-format retailers, especially in municipalities that depend heavily on sales-tax revenue. Such stores will be even more critical in the COVID-19 recovery, not just for their direct fiscal contributions, but also as anchors for larger shopping centers and traffic drivers for a severely distressed small-business sector.
At the same time, some powerful forces are pulling in the other direction, compelling practitioners and policymakers to reconsider the wisdom of pursuing such businesses. Most notably, there is the accelerated rise of e-commerce, which has already spelled doom for a slew of now-defunct category killers. And this trend is set within the context of an overbuilt retail footprint, as measured by square-foot-per-capita figures dwarfing those of other modernized economies in Europe and Asia.
However, this narrative is grossly oversimplified, raising the danger of an overcorrection. Online sales as a percentage of total retail sales will no doubt increase as a result of COVID-19, but there will be a ceiling to this growth, due to aspects of human nature that will always favor in-store shopping; the massive costs associated with delivery, customer acquisition and returns (and inability to pass those expenses along) that give retailers a powerful incentive to lure consumers to physical stores; and the role that those stores themselves play in rationalizing such costs, through buy-online-pickup-in-store (BOPIS), curbside pickup and ship-from-store, for example.