By Michelle Siegel
Amazon has undoubtedly been on the minds (and screens) of many University of Maryland students this holiday season, with an untold number of Terp wallets now feeling lighter after some Cyber Monday impulse shopping.
Despite Amazon’s reputation for frivolities, the company recently confirmed in an email statement on Nov. 11 that it would be taking a deeper dive into more practical retail by opening a grocery store separate from Whole Foods, which became an Amazon subsidiary in 2017.
This may come across as old news to those who attended “The Future of Retail,” a lecture delivered by the president of a retail real estate consulting firm in mid October at the School of Architecture, Planning & Preservation.
Beyond referencing Amazon’s grocery store plans, SiteWorks President Nick Egelanian — who had been brought on as a speaker by the Colvin Institute of Real Estate Development as part of its Colvin Fall Lecture Series — spoke about his perspective on the past, present and future impact of the internet on retail.
The Merriam-Webster online dictionary defines retail as “the sale of commodities or goods in small quantities to ultimate consumers” — as opposed to wholesale, which it defines as “the sale of commodities in quantity usually for resale (as by a retail merchant).”
“The general public today believes, in a five trillion dollar retail economy, that somewhere around two and a half trillion dollars worth of goods and services are being bought online,” said Egelanian, who also serves as an adjunct professor for the Master of Real Estate Development degree at this university.
As it turns out, much of what people buy on a daily basis do not include things that they would think of buying online.
“80% of U.S. retail is what I call ‘invisible retail’ — it’s the stuff you use every day that you don’t even know you’re using. But it’s basically what you wear to work, it’s what you eat, it’s what you clothe your kids with, the diapers you buy, the butter, the bread…”
According to Egelanian, Amazon’s retail, in particular, underperforms in contrast to the general public’s assumption, which holds that 90% of online retail sales are through Amazon.
“Amazon is responsible for less than one percent of U.S. retail sales,” Egelanian said. “Its website is handling closer to three percent. But in terms of the retail that they’re actually selling — [it’s] less than one percent.”
This is to say that less than 10% of online retail sales are through Amazon.
As for stores like J.C. Penney, Macy’s and Sears, Egelanian recognized that “the department store business is effectively done today,” but claimed that the experts and laymen who blame online retail for the fall of department stores need to take a closer look at the data.
Specifically, Egelanian argued that department store sales have declined due to the rise of big-box stores and category killers.
The term “big-box,” according to the Cambridge online dictionary, refers to “a very large shop that sells a large number of products, usually at low prices.” Investopedia names BJ’s, Costco and Sam’s Club as examples of big-box retailers.
Meanwhile, the term “category killer” is defined by the Merriam-Webster online dictionary as “a chain store that dominates the sale of merchandise in a particular category (such as toys, sporting goods, or office supplies) by offering a large selection of products at discounted prices.” According to Investopedia, category killers include Best Buy for consumer electronics and Bed Bath & Beyond for furnishings.
“The department store business is a thing of the past,” Egelanian emphasized. “We basically built them out of business over the last 35 to 40 years. And we did it — Amazon didn’t do it. We were two-thirds of the way through it before Amazon even got started.”
However, that maxim only applies to department stores. Contrary to popular belief, big-box stores and category killers are not crumbling in the face of competition from Amazon and other online retailers.
It only seems that way, as Egelanian explains, because the shopping center business formed by big-box stores and category killers can now be considered “mature.”
“It’s not that they’re going away — it’s that growth is stopping,” Egelanian said. “There’s nothing to replace this — this is the way it works. And no, Amazon is not replacing this. This is the way most people in the world will buy their products, because it’s the most efficient way … It’s the reality of the world.”
Brendan Sanford, a senior economics major, said that he enjoyed the talk.
“It was surprising,” Sanford said. “I knew the preface coming in, that it was going to be contrary to popular belief, but I really liked…seeing [that] the news isn’t exactly the facts.”
Master of Real Estate Development candidate Mohsen Teimouri shared similar sentiments.
“It was surprising,” Teimouri said. “[Egelanian] was emphasizing that, ‘It [Amazon] is not the big deal that everyone’s talking about’ — I [had] thought it was a big deal.”
Egelanian, when asked about what he wanted the audience to take away from his lecture, summarized his message by highlighting the surprising complexity of retail.
“lt’s alive and a very vibrant business,” Egelanian said. “…it’s just not the ‘growth’ business it was…Americans aren’t going to change their shopping that much, and they really haven’t changed that much at all.”