The Changing Face of Retail

By Stephanie Allen, Project Assistant

This year I bought all of my Christmas presents online. All of them. I am a person who LOVES Christmas shopping. Some of my favorite memories are of Christmas shopping in Woodstock, NY, where all the little shops had hot cider and cookies, where there were carolers and pine boughs and often snow, and where you could find all sorts of unique gifts from local artisans and crafters. Back in the early 2000s, I never dreamed of Christmas shopping online. I bought a few textbooks online and a CD or two, but now I buy almost everything online from books to dog food to paper towels to handmade pottery, used records and vintage clothes. I’ve even used a few different apps for same-day grocery delivery.

Why would Christmas be any different? To be honest, buying online takes much of the joy out of Christmas shopping for me. But, it’s just SO convenient. And, as far as the rest of the year goes, I don’t even feel like I’m missing anything—I prefer to shop online. Apparently I’m not alone. This year Black Friday online sales were up 21.6% over the same day last year. According to the census bureau, online sales for the third quarter of 2016 were up 15.7% from the third quarter 2015. And, retail foot traffic is declining. In 2013, total retail foot traffic in November and December was down to 17.6 billion from over 30 billion in 2010.

All of these online sales have lead to a changing physical landscape in cities and suburbs across the country. There is less demand for retail space. Suburban shopping centers have been especially hard hit. From 2010 to 2015, more than a dozen shopping malls closed. In 2015, 15% of the nation’s 1,200 malls were between 30 and 50% vacant. And, currently, more than 60 malls across the country are considered on the brink of death. As we continue to make more and more of our purchases online, we will likely see fewer brick and mortar retail operations. 

But, that’s not the only change we’ll see. We’re making fewer driving trips for shopping and while that may mean low occupancy rates for retail parking lots or less traffic in retail shopping centers, it also means an increase in freight traffic. According to a recent U.S. Department of Transportation study, our online shopping will be a major contributor to a 45% increase in freight traffic by 2040. It also means an increase in residential neighborhood traffic by delivery men. Yesterday, the mailman brought packages to my door, as did the UPS guy, the FedEx guy, and the OnTrac guy. 

Our communities will need to plan for these changes. We’ll need to make room on our roads for more freight traffic and perhaps make attempts to divert some of that traffic to other modes. We’ll need to make plans for dying malls and empty strip malls as well as their expansive parking lots. And, until drone delivery becomes more commonplace and/or driverless vehicles become part of our freight delivery system, we’re going to need more drivers and more warehouse workers and fewer retail employees.

The Ghost of Manufacturing Past

By Evan Robertson, Senior Project Associate

I have fond memories of the excitement building up to the holiday season. As a child, it was as if the entire world was building up to a particular day or set of days where humanity slowed down, however briefly, for a moment. As an adult, you discover that there are a lot of people responsible for creating this air of mysticism around the holiday season. Retail employees and, increasingly, delivery drivers are the front face of the entire operation. 

What we typically don’t think about however is the cadre of individuals who were directly involved in the production of what we give or receive. Whether it is a new smartwatch or new gadget, there were a lot of hands that went in to making it. That may not be the case for much longer, especially if the product is stamped with the words “Made in the USA”. Increasingly manufacturers are turning towards automation to solve production issues and lower labor costs. We as economic development professionals have long talked about the new, automated face of manufacturing. But, you never really grasp the concept without experiencing it or seeing it first had. 

By happenstance I recently came across a video that perfectly exhibits the new face of American manufacturing. The video was release by Valve, a video game developer and digital distribution company. Valve hosts a popular video game marketplace called Steam® and recently decided to dip its toe into computer hardware with a video game controller aptly named “Steam® Controller.” A video game company entering the hardware market isn’t a huge story I’ll admit. But what struck me is that the company chose to produce their controller right here in the United States. What also struck me is how few people are actually involved in making the controller. From packaging to quality control, there is little human intervention in the production process. 

This only reinforces my experience at a KIA plant in West Point, Georgia a few years ago as well as numerous other manufacturing facilities I’ve had the opportunity to tour. Machines are everywhere, humans only dot the production line. As we debate and devise new approaches to revive manufacturing in the United States and attempt to bring back jobs lost during globalization, it is important to realize that cost above all else will determine the extent of the manufacturing sector’s capability to create jobs here in the United States. This is to say that reshoring manufacturing jobs here in America from China will not be a one for one trade. A U.S.-located Foxconn factory will not in any way resemble a China based Foxconn facility. If we are successful in bringing back manufacturing to the United States, who knows, the next iPhone you give or receive as a gift may not have ever touched a human hand.

Infrastructure Watch: It Begins

By Evan D. Robertson

Ah, post-election America: news breaks by the second, television is rapidly approaching peak pundit, and prognosticators are well, prognosticating. The central question on everyone’s mind is this: “what exactly does an America with Donald J. Trump at the helm look like?” It is anyone’s guess. Minus a few campaign positions declared during the election it is tough to know for certain where the executive branch will stand on any given issue. Take economic development for example: Trump recently reached a $7 million deal with Carrier to keep jobs in Indianapolis in which Carrier promises to keep approximately 800 jobs in Indiana. Next time you settle down to strike a deal with a prospect, you just might find the President, the Vice President, or a federal representative at the table alongside you. Like I said, no one can say for certain what America will look like over the coming years. One thing I am certain about, however, is that this nation will be talking about, and hopefully building, infrastructure. 

During the Thanksgiving Day holiday, I had the opportunity to read a recently published book by Rosabeth Moss Kanter entitled Move: How to Rebuild and Reinvent America’s Infrastructure. In the book the Harvard Business School professor, whom Mac quotes with regularity, painstakingly details the issues and opportunities embedded in America’s current infrastructure landscape. As I made my way through the book, I began to wonder whether America is going to get its future infrastructure investment right. What types of infrastructure are we going to invest in? Will it be intelligent infrastructure or more of the same concrete and steel roads, bridges, and pipes of yesteryear? Is America about to make a $1 trillion blunder? 

Take roads for instance. American cities have a deep and tenuous relationship with large federal infrastructure projects. The need for a federal highway system was often used as a guise for “urban renewal” which in most cases describe the process by which whole neighborhoods (usually poor) were destroyed in order to make way for new highways. It is no coincidence that many city centers throughout the nation have a highway either running directly through their downtown areas or somewhere nearby. It is interesting too to see numerous cities now trying to heal the old wounds wrought by the federal highway system. The most famous example is Boston’s Big Dig, a $15 billion project that relocated Interstate 93, which once ran through the heart of Boston’s downtown area, underground. Atlanta too has proposed its own solution called “The Stitch” aimed at building over the central highway artery that currently divides numerous communities throughout Atlanta’s Midtown and Downtown areas. Cities are just now mending the wounds of infrastructure built decades upon decades ago.

At the same time, entrepreneurs are rapidly developing new service delivery models and automating cars. Innovations which may obviate the need for significant road investment or, at the very least, alter the type of transportation investment required to secure America’s future competitiveness. As a regular patron of Uber, the company is making a strong case for ditching the car and exclusively using public transit and ridesharing services to get around. In the next 5 to 10 years, folks may begin to drive less and utilize ridesharing services more. In the next 15 to 25 years, car ownership might be viewed as unessential to American life, once again relegated to those privileged few who enjoy driving for recreation. Given the amount of money car companies are investing in autonomous technologies and artificial intelligence, we may not be driving at all. 

In an increasingly interconnected world, if America spends $1 trillion dollars on concrete and steel to build its infrastructure then America has wasted $1 trillion dollars. If a road doesn’t provide real time analytics on usage, self-identify potholes, respond appropriately to an accident (such guiding traffic around the accident by automatically closing lanes), or provide the baseline connectivity required for cars to operate autonomously, then our infrastructure dollars were poorly spent. If our drinking water infrastructure is unable to detect a water main break or leaks in the system, then we will have misappropriated $1 trillion dollars. If our transportation network does not provide seamless interaction between all modes of transportation (road, rail, public transit, and in some cases sea), then forgoing the investment may have proven a more effective use of our tax dollars. Tomorrow’s infrastructure should look markedly different than it does now, it should incorporate all the innovations that have been developed and are still developing in our technology-driven era. If we get this wrong, our future competitiveness on the global stage will assuredly suffer.