Why Retail Struggles Persist in the U.S. While Other Countries Thrive

Have you ever wondered why shopping malls and retailers are faring much better in many parts of the world than in the United States? Why is there no retail apocalypse in countries like South Korea, Germany, or Japan, where stores and shopping centers continue to thrive, often amidst the economic challenges brought about by the COVID-19 pandemic?

The answer to this puzzle is multifaceted. In a global perspective, the retail sector is under pressure everywhere. However, the United States stands out due to a combination of factors that have been exacerbated by the increase in online shopping and the country's unique retail landscape.

The Role of E-commerce

Overstored Merit: Many economists argue that the U.S. is “overstored.” Americans have access to a disproportionately high amount of retail space per person compared to other developed nations. This “overstored” condition is now intensifying with the rise of e-commerce, as more and more retail operations move online.

Ecommerce Boom: The boom in online retail has transformed the consumption landscape. Free or cheap shipping, convenient online shopping, and the ability to browse and buy anytime, anywhere have made the U.S. a prime market for e-commerce companies. This shift has put traditional brick-and-mortar retailers at a disadvantage.

The U.S. Retail Landscape

Excessive Retail Space: The U.S. has more retail space per capita than any other major country. This abundance means that smaller stores and shopping centers are often left behind. Unlike densely populated areas in other countries, U.S. retail spaces are often located in low-density suburban areas with limited foot traffic. They rely on the customer’s deliberate decision to visit, rather than impulse or convenience.

Difficulties for Local Businesses: The vastness of the U.S. retail market creates a challenge for smaller businesses and regional brands. It is harder for niche stores to make an impact in a market where online competition is fierce and traditional stores are struggling to compete.

Consumer Behavior and Marketing

Shopping Habits and Marketing Tactics: The way Americans shop is significantly different from consumers in other countries. Many U.S. consumers are known for their tendency to buy things impulsively, even if they don’t need them. This impulse buying behavior has led to phenomena such as “apocalypse survival kits,” which are widely purchased and advertised but often contain low-quality items of questionable usefulness.

Marketing and FOMO: There is a high level of marketing and fear of missing out (FOMO) in the U.S. market. Deals, discounts, and sales attract shoppers who are willing to buy products they might not need, simply to take advantage of the deal. This “buy now, think later” mentality has been fueled by aggressive marketing and the cultural emphasis on instant gratification.

The Social and Economic Implications

Domino Effect of Economic Disruption: The retail struggles are part of a larger domino effect. Unemployment caused by store closures means people have less disposable income for discretionary spending. This further exacerbates the situation, as fewer people are able to dine out, go on vacation, or save money.

Children and Economic Burdens: With schools closed and children at home, parents are burdened with additional responsibilities. This can lead to even less disposable income, creating a vicious cycle that further undermines the retail sector.

Conclusion

While the retail apocalypse is a reality in the U.S., other countries have managed to maintain or even improve their retail sectors. The reasons for these differences are complex, including the unique cultural, economic, and social factors that shape the retail landscape in the U.S. Understanding these factors is crucial for both local businesses and international retailers looking to navigate the U.S. market.