This type of initiative, open source platform, disintermediation, and innovation is what makes me think that a very large part of traditional retail will disappear in the next 10-15 years.
Its interesting that US retail brick and mortar is about 300% overbuilt aka in a bubble at this time. All we need to do to revert to the norm is close/bulldoze 2 of 3 CRE buildings, or triple our population without expanding CRE.
You can google for "per capita square feet retail" or just try this link which is reasonably good. The graph of "Square feet of retail per capita by gdp per capita".
Its also interesting to look at greater trends WRT income inequality, destruction of the middle class, and permanent downward mobility, vs the existing stock of CRE. Its looking like a bit of a mismatch. That future is here already WRT "food deserts" in the inner city, etc.
Square footage is a pretty dumb metric. square footage of the US >> square footage of Japan, Switzerland, UK, etc. We have more room, and it's much cheaper - of course we use more of it.
Normalize square footage by some reasonable metric (price per sq ft in percent GDP perhaps?) and maybe I'll take the "bubble" idea seriously.
Ah but that analysis assumes the only cost of retail area is initial purchase price of the undeveloped land. I would theorize the cost of construction is "more or less" the same and certainly the cost of labor to maintain and clean it is very high. Also energy costs to heat, light, cool, ventilate... all "about" the same.
Another failure of analysis is the cost of a sq foot at a reasonably constant level of development. What I mean is a sq foot in Tokyo needs to be compared to a sq ft in Manhattan, not a sq foot in New Mexico 100 miles from the nearest Starbucks. What I'm saying is it doesn't matter if land in Wyoming is cheap, if its empty and shopper-free.
There is also the inventory aspect... assuming a stable scenario (admittedly unlikely) my annual purchases have to subsidize the annual costs of 50 sq feet of "stuff" both inventory and maintenance whereas someone in .jp only has to subsidize the annual costs of 10 sq feet of "stuff", therefore their standard of living should be higher than mine because they don't have to support so much deadweight.
Much of these costs will be "built in" to the price per square foot. Land in Wyoming is cheap precisely BECAUSE it is empty and shopper-free - it has lower profit potential. No one will pay $10k/sq ft for space in Wyoming because it would take forever to make their money back. Simple economics - supply and demand - there is ample supply in wyoming but no demand.
Inventory is also a bad metric, Wal-Mart for example makes much of its profits by way of logistics (getting stuff onto the shelves as it sells), not by keeping inventory in stores.
So what, you think there are no economies of scale? Obviously traditional retail will keep being strong, because it will remain cheaper and with higher margins. You are instead looking at and expanding market.
When something new comes, it does not mean it replaces something existing. Same mistake people do with tablets, thinking they will make all desktop computers completely disappear. AGain, it just leads to more fragmentation and a bigger cake overall.
1. I haven't said "there are no economies of scale"; and I don't know how this relates to my point.
2. "traditional retail will keep being strong", during the past 5 years retail has been one of the hardest hit industries both in the US and Europe, I don't understand the basis for such argument.
3. "will remain cheaper and with higher margins" - retail prices tend to have an over cost of 30%-40% due to fixed costs, primarily due to distribution, real estate and retailer markup. Again, I don't understand the basis for such argument.
4. "When something new comes, it does not mean it replaces something existing." The internet replaced travel agencies, taxi/limo booking desks, the yellow pages, music distribution, etc. That's the internet alone, but if you take a look at large supermarkets such as Walmart, this has swiped mom 'n pop retail shops all over the U.S.
The great thing about this discussion is that time will tell.
You can google for "per capita square feet retail" or just try this link which is reasonably good. The graph of "Square feet of retail per capita by gdp per capita".
http://improvingtheinherited.com/post/7351838533/is-the-us-o...
Its also interesting to look at greater trends WRT income inequality, destruction of the middle class, and permanent downward mobility, vs the existing stock of CRE. Its looking like a bit of a mismatch. That future is here already WRT "food deserts" in the inner city, etc.