Why the demise of brick and mortar stores may not be such a big deal for the economy

Customers shop for electronics items during Black Friday at a Best Buy store in San Diego, Calif.

Big box retailer Best Buy released some truly dismal holiday sales results today. Sales fell nearly 1 percent during the holiday shopping season. Sears and Costco saw disappointing sales too, and JC Penney announced it is closing 33 stores and eliminating 2,000 jobs. 

A decade ago, big box stores were the titans of retail; small businesses were shutting their doors left and right because they couldn’t compete with the likes of Costco, Best Buy and Target on price and selection. Now the big boys are "struggling to find their customers," says Laura Kennedy, principle analyst at Kantar Retail. "I think Seth Meyers made a joke on Saturday Night Live that 'Toys R Us announced its stores would remain open for 87 straight hours leading up to Christmas... meanwhile, the Internet announced that it will be open all the time, always, forever.'"

E-commerce accounts for roughly 6 percent of the retail economy. That number is growing fast, but if retail titans like Best Buy go down the tubes, we could have a problem. "They do $45 billion in revenue, so it is a big deal," says Brian Yarbrough, a consumer analyst at Edward Jones. "Retailers realize they probably over-expanded and made the box too big over the years, and when they close, it’s not good for the economy."

The biggest issue? Jobs. Yarbrough points out big box stores employ thousands of people, from sales clerks to store managers. Still, he says, many of those jobs will migrate along with our shopping habits. "You might lose a few people in the stores, but a lot of these retailers are ramping up hiring around systems and software and distribution centers. And I think that there’s not a ton of job losses."

Adding to that, big box stores are becoming economic small potatoes. "They’re becoming less part of even the retail space," says Chris Christopher, a consumer economist at IHS Global Insight. "So they are becoming less important and they also are struggling. Just because a lot of consumers are sort of saying, ‘Hey, I don’t need that extra item.’"

Christopher points out the economy has improved, but the average household has about 8 percent less income than it did before the recession. That gives another edge to online retailers, which can charge less for items because they don’t have to pay for the big overhead of a big box store.

About the author

Stacey Vanek Smith is a senior reporter for Marketplace, where she covers banking, consumer finance, housing and advertising.

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