Brick-and-mortar stores taking a hit despite record holiday spending

Holiday shoppers are expected to drop more than $960 billion on gifts, foods, and decorations this year, but the spending sprees won’t necessarily translate to big bucks for traditional brick-and-mortar stores.

The overall strength of consumer spending, which hit record levels in November and the first half of December, is obscuring how trends in retail have shifted over time, creating opportunities for online stores and retail behemoths like Amazon but also pushing out physical stores and small businesses.

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And while the pandemic accelerated the shift from traditional stores to online marketplaces, a growing number of consumers seem to prefer the method, a change that has been more than two decades in the making.

“Online sales have dramatically reshaped the retail industry since the turn of the millennium,” Upgraded Points founder and CEO Alex Miller said. “In the late 1990s and early 2000s, startups like Amazon and eBay led the charge into e-commerce, and their successes led established retail chains to make online shopping a core component of their businesses. From 2000 to 2019, e-commerce grew from 0.9% of all retail sales to 10.6%. And with many physical retail stores closing or experiencing lower traffic in the wake of COVID-19, online sales jumped again to 14.6% in 2020 and have not fallen off since.”

While there have been efforts by some cities to prioritize and incentivize buying local, it’s becoming harder and harder for independent stores or even some midsize chains to compete with the attractiveness of purchasing presents and holiday items online. Between 2011 and 2021, the latest 10-year period data available from the U.S. Census Bureau, the country has lost 60,000 retail stores, a deep 12.6% decline.

According to the Upgraded Points survey, the largest metro areas seeing some of the biggest declines in brick-and-mortar stores are tech hubs on the West Coast like Silicon Valley’s San Jose (negative 23.6%) and San Francisco (negative 19.8%), which had the largest and third largest declines, respectively. Seattle came in second with negative 22.8%. Salt Lake City (negative 19.4%) and Austin, Texas, (negative 19.3) rounded out the top five.

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However, when it came to states losing retailers as a whole, Vermont ended up on top of the loser leaderboard, clocking a 20.8% change. The state lost 619 stores in a decade, going to 2,696 in 2021 from 3,315 in 2011. Washington state came in second, followed by Arizona, Utah, and Montana.

“While the extent of retail closures varies regionally, the number of retail stores per capita declined almost ubiquitously during these 10 years,” Miller said. “Notably, retail locations in the West, Midwest, and prominent technology hubs were generally hit harder, while those in the South have remained slightly more resilient.”