Topics: eCommerce, 2022 Trends

Transcript:

Chris Ressa 0:00
This is Retail Retold, the story of how that store ended up in your neighborhood. I’m your host, Chris Ressa, and I invite you to join my conversation with some of the retail industry’s biggest influencers. This podcast is brought to you by DLC Management.

Welcome to Retail Retold. I’m your host, Chris Ressa. Thank you for joining me today. Today I have a short, but I think interesting episode. In late 2021, Karly Iacono, and I put out our predictions for 2022. And our top prediction was that more online stores would close than physical stores. That prediction was based on the fact that it was and still is clear that the physical store is a great way to profit. And figuring out profit at scale with an online only business is extremely challenging.

And I wanted to talk about how that is playing out. It is really easy to find some stats around physical store closures, it makes all the headlines. So if you go to Google and type, how many physical retail stores have closed, you’ll get articles. And you’ll see, in 2021, you know, something like 5000 retail stores closed and more retail stores open than closed. But if you do the same thing for e-commerce websites, you don’t find much. But what is interesting is, Shopify reports earnings.

And there are many articles on the stats of Shopify, which now has about 3.8 million stores worldwide on the platform, just on Shopify. As you scrub through information related to Shopify, one of the things that you find is that 95% of the businesses on Shopify fail. Not only do 95% of the businesses on Shopify fail, most of the businesses on Shopify fail and closed shop within 120 days of opening.

That is a pretty remarkable stat since the small business, I forget who it is, Small Business Bureau or Small Businesses Association, the Bureau of Labor Statistics, I’m not sure what it is. But the stat that I’ve read is that close to one in five small businesses fail within year one. And 30% of small businesses fail within the first two years of being open, which isn’t good, but is clearly significantly better than the stats on the Shopify platform. If you just look, like, how many stores total have closed on Shopify alone, I couldn’t find the information.

Can’t find it. But if you just do some math, because the Shopify platform, the number of stores has grown by 200% since 2020, it’s been remarkable growth. I think Shopify is a great way for businesses, entrepreneurs, to start out, no doubt. But it would appear based on the the number of businesses that fail on Shopify and the volume that they have growing on the platform that more online stores are closed on Shopify, than physical retail stores throughout the United States, just on Shopify alone.

Now I don’t have the actual number, couldn’t find that. But we haven’t looked at any other e-commerce sites that have shut down. So I think the point is, it’s pretty clear that more online stores are closing than physical stores in America. I think one of the things is, as Shopify, there’s, let’s be fair, the cost of entry to a Shopify site is inexpensive compared to a physical retail store site. So it’s probably easy for people to walk away. Some people aren’t doing it full time. They’re not all in.

And given the volume, there is no doubt that there’s going to be a lot of closures. I understand that. I’m only saying that that’s just one example. One platform. Now it is a meaningful platform because from a gross merchandise value, they account for a lot of e-commerce sales. But there are clearly many other e-commerce sites that have closed that are not on Shopify. So if you add them all up, the number is dramatic. But we don’t read about that in headline news. And so will this trend continue?

I think it’s pretty clear that competition online is pretty fierce. The reality is that, and I don’t know the stats today. But you know, 65% of all e-commerce sales were done by like, 10 companies last year, I think that’s growing. It’s, you know, it’s Walmart, Target, Amazon, Wayfair, and a few others. So until the marketing that an online business is so easy for entrepreneurs concept goes away, we’re going to continue to have more closures online than we do with physical retail.

This trend is going to accelerate. At a minimum from a volume perspective, at a percentage perspective, I don’t know because finding the pure stat is really hard to find. But you can tell by, just by using Shopify, that it’s not getting easier to make money on e-commerce, and it’s probably getting harder. So that’s what I had for today, everybody. I have a very short episode, but I posted about it on LinkedIn.

And I wanted to share with everybody that although it is clear that e-commerce is only the tailwind, and the way to the future is omnichannel, some combination of physical and online, but online only is proving out to be a super challenging business.

I hope everyone had a great summer. I certainly did. Ready for the Fall, though. The drought in northern New Jersey. Pretty hot. tough year for grass. My grass really took a beating. And so I’m ready for fall. I’m ready for football, fall season and having a great fourth quarter. Take care everyone. Stay tuned for next week for another episode of retail retold.

Ressa 9:08
Thank you for listening to Retail Retold. If you want to share a story about a retail real estate deal that you were a part of on our show, please reach out to us at retailretold@dlcmgmt.com This show highlights the stories behind the deals from all perspectives. So it doesn’t matter if you are a retailer, broker, entrepreneur, architect or an attorney Also don’t forget to subscribe to Retail Retold so you don’t miss out on next Thursday’s episode.