Tuesday, December 1, 2015

Retail and Culture

Once upon a time, it is said, the United States of America had a mono-culture. All Americans, they say, watched the same programs, listened to the same music, ate the same food and wore the same clothes. This is not quite right … but it’s almost right. There was a time when the mainstream of culture was pretty wide. To some degree, this had a lot to do with the means of communication. In the 1930’s, for example, major theatres were owned by the major film studios, and played the movies of those studios exclusively. When this was broken up, the studios had to work harder to get butts in seats – they could no longer funnel people in to see their big films. Likewise television. In the 1960’s you have three major networks and maybe one or two local channels showing re-runs. In the 2000’s, you still have the big three (well, four including FOX), but you have a couple hundred cable networks and, more importantly now, Netflix, Hulu, and YouTube. My daughter watches more YouTube and Netflix in a day than television by a wide margin.

As the choices available to consumers has multiplied, the so-called “mono-culture” has fractured. Various TV shows, magazines, movies, books and songs that are popular no longer penetrate the overall culture to the extent they once did. One can still point to the best-selling comic book of 2015, for example, but its sales numbers are so anemic they would have gotten it canceled after a single issue back in 1970. Take movies for instance.

The graph above shows the number of tickets the top grossing movie of each year sold as a percentage of the U.S. population in that year. There were ups and downs, and some notable major successes: Gone with the Wind wins hands-down, but The Ten Commandments, The Sound of Music, Star Wars and ET: The Extra-Terrestrial are all pretty popular movies, being viewed, so-to-speak, by about the half the people in the country (well, probably not half, since plenty of people went twice or three times, but you get the idea). Titanic was maybe the last movie to get quite that much penetration into the culture. People made a big deal about Avatar, but in terms of cultural penetration, it didn’t do much better than some of the weaker films of the 1940’s. The trend line on the graph shows the overall rise of the movie in importance to popular culture, and the subsequent fracturing of that culture beginning in the 1970’s and continuing to this day.

So what’s the point?

I wonder if the continued fracturing of the culture also means a fracturing of people’s shopping habits. As sub-cultures on the fringe become larger in comparison to the shrinking “mainstream”, retailers will have to diversify their stock to serve them, which would suggest larger stores, or we will see the rise of specialty stores with higher price points (small sub-cultures cannot take advantage of economies of scale the way a monolithic culture can) and less real estate, i.e. smaller shops.

To date, the trend does seem to be “smaller is better” for anchors, though to be fair the trend was “larger is better” just a few years ago. Cultural fracking is probably not the source of these particular shifts. If the trend is for smaller locations, it might take many years to realize it in terms of statistics, since retailers are often forced to take space that is anywhere from 5 to 20 years old (or older). More likely, we would first see the trend in lower rental rates, as niche retailers are forced to take more space than they need, and seek to redress this by paying less for the space. Something to think about and look for in the coming years.


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