Battle of Brick & Mortar vs. E-Commerce Who is Winning?

Battle of Brick & Mortar vs. E-Commerce, Who is Winning?

April 2, 2019

By Colin O'Shea
Securities Analyst

Most economists agree that retail sales are a major component that determines the economy and the financial health of the United States. If that is so, where are those retails sales occurring? In the words of Bob Dylan “The times, they are a- changin.”

Where are all of the Retail Stores Going?

The futures of malls and brick & mortar retail stores across the country are undergoing a cultural shift.  Many communities across the U.S. are seeing their physical retail footprint shrink.  Malls are losing anchor stores, smaller retail shops inside, and outside of malls are closing.  The Siouxland area is no exception. Several local retailers closed in the last few years including two anchor stores inside the Southern Hills Mall. The major cause of this shift is  e-commerce (online shopping).

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Source: Credit Suisse

Battle of supremacy 

The battle for supremacy in the retail sector between e-commerce and brick & mortar stores is significant. The total size of the retail sector is over $500 billion. The retail sector is responsible for 16% of all wages in the U.S. and supports another $1.2 trillion in other industries.

Although e-commerce accounts for 10% of retail sector sales, its growth is astounding.

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Source: Statista

In 2010, the e-commerce share of quarterly sales overtook department store sales and never looked back. Now, e-commerce accounts for all of the growth in the retail sector, while brick & mortar revenue continues to decline.

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Source: Wolfstreet.com, St. Louis Fed

There are several reasons for the increase in e-commerce.  Technology advancements lay at the core of them.  The internet enables businesses, large and small, to list their products on a website, where anyone in the world can shop.  With many retail businesses using this online shopping capability, it increases the ease and comfort of the shopping experience.

The advent of the mobile phone also propelled e-commerce.  With about 3 out of 4 Americans owning a mobile phone, the smartphone has become the go-to device for online purchases.  The following chart shows the share of e-commerce by mobile phone, which is about 44% today, and rising.

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Source: Statista

Retailers that are able to adapt to technological progress will survive this transition.  This is evident with local brands, like Hy-Vee, offering online ordering for pick-up or delivery and national brands like Walmart, provide similar services.

Since retail is a large part of the market, we continually monitor the developments in this sector to position ourselves for opportunities. 

For 136 years, Security National Bank has helped families and businesses plan and execute a strategy to make them financially secure. Over the decades, much has changed in the community, economy and investment markets and we have helped people make sound investment choices. Please allow us the chance to help you develop or enhance your financial security. Contact one of our financial representatives to discuss how we can help strengthen your portfolio in changing markets.

About the Author

Colin O'Shea

Colin O'Shea is a Securities Analyst within the Wealth Management Division at Security National Bank, where he researches and analyzes assets and trade securities and helps develop investment strategies. A veteran who served in the U.S. Army for 12 years, O'Shea holds a Business Administration Degree from Morningside College.