Why Is the Retail Sector Struggling? People Are Broke – Especially Millennials
When we reported on the Toys R Us bankruptcy, we argued that it wasn’t just about shifting shopping patterns away from brick and mortar to online companies. A recent article on TechCo complaining that millennials are broke backs up our assertion.
As we pointed out, online retail sales have increased significantly, but they don’t account for the total decline in sales in brick-and-mortar stores. Peter Schiff has argued the problems in the retail sector reveal disturbing economic truths about middle America.
Another reason people are shopping on the internet, other than just the convenience of not leaving your house when you’re doing your shopping, is the fact that the average American shopper is broke. They can barely afford to buy the stuff that they’re buying. In fact, most people are buying stuff that they can’t afford. They’re just buying anyway and they’re using a credit card…Retailing is a shrinking market because Americans’ pocketbooks are shrinking, their paychecks are shrinking.”
Data on consumer debt backs up Peter’s contention that Americans are putting a lot of their purchases on plastic. He went on to say we need to look at the bigger picture when analyzing retail woes.
Wall Street can just be very dismissive about this and very complacent just chalk it all up to, ‘Hey, this is just automobile putting the buggy whip manufacturer out of business.’ This is not what’s happening. This is a sign of real problems in the US economy.”
The TechCo article dovetails with this theme from a millennial perspective. Connor Cawley bemoans the fact the his generation gets blamed for killing failing industries. He says it’s not their fault.
If you think about it for more than a few seconds, you’d realize something rather significant: Millennials aren’t killing anything. We’re just broke and all these outdated businesses are rightfully falling by the wayside.”
Now, he does reference outdated businesses. Of course, few people deny there is a shift from older brick and mortar companies to online retailers such as Amazon. At any rate, Cawley’s main gripe doesn’t seem to be with the mall, but with restaurants like Hooters that objectify women. Regardless, he does manage to drill down to a more fundamental factor driving business decline.
Millennials don’t have any money.
If you hadn’t heard this yet, your Millennial news alert must be broken. Other than our murderous ways when it comes to business, Millennials have been defined by our lack of sufficient funds. Maybe it’s because of student debt. Maybe it’s because of avocado toast. The only thing we know for sure is that we don’t have any money, and the numbers back us up.”
The stats are pretty convincing.
According to one study, millennials earn approximately $10,000 less than members of Generation X and will likely make around $100,000 less over the course of their careers. On top of that, they are saddled with over $1 trillion in student loan debt. This has significant economic ramifications. A study by American Student Assistance and the National Association of Realtors found 71% of students cited student loan burden as the main factor for delaying a home purchase.
Cawley sounds a little whiny, but he makes a valid point.
We can’t buy homes because you took all our money, we don’t have credit cards because you ruined our credit, and we don’t go to Home Depot because we don’t own homes or carry credit cards. It’s that simple.”
The bottom line is broke people don’t buy a lot of stuff. When they do buy stuff, they find the cheapest way possible. So, it’s not necessarily true that shoppers don’t want to go to the mall and try on clothes before they buy them. It’s that they can’t afford to. They can’t spend the extra few dollars for the shopping experience.
And it’s not just millennials. Americans representing every demographic feel the squeeze. Wages are stagnant. Debt is soaring. Costs are rising.
Nope. It’s not just about Amazon.
Photo by Dave Croker
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