Consumers have now shifted up to 11 percent of their shopping online and this means that the US needs to get rid of 11 percent of their physical stores, according to former Macy’s CEO Terry Lundgren. He says that overall the consumer is healthy and spending but that doesn’t mean that physical stores shouldn’t close to match supply and demand.
Terry Lundgren, former Macy’s CEO, discussed the health of the economy and the need to close more physical stores on CNBC:
The Consumer is Healthy and Spending
If you just look at all of the numbers week after week you’d have to say that the consumer is in very good shape, as good a shape as I’ve seen this consumer. Obviously, GDP is driven by consumption and the numbers are good. You’ve watched retailer after retailer putting up really good numbers, top, and bottom line. They’re even raising earnings and guidance in some cases, and getting no credit for that by the way in most cases for their stock price. I think that has nothing to do with how the consumer is responding.
I think the consumer is healthy. I think the consumer is spending. I think the stores are busy. More consumers are shopping both online and in-store and I think that’s really good for business because they spend more when they’re in a physical store than they do when they do it when they’re online. We’re set up for a very decent finish to the year.
This Country is Way Over-Stored
There has been an oversupply of physical retail stores in this country, and it’s this country by the way. This country is way over-stored. We’re at 23.2 square feet per human being in the United States versus 16 in Canada and 4.8 in the UK and then they get smaller from there. We’re just way over-stored, so there has to be a contraction. I can tell you in the case of Macy’s two years ago they’ve done this and closed 20 percent of their stores.
That’s what has to happen because of this shift to online that has occurred, which has been the reality. It’s still only about 10 or 11 percent of all retail sales by the way, but it is growing. You have to get rid of 10 or 11 percent of the physical stores just because of that and that hasn’t happened. So the answer is no we’re not there yet but when that does happen over time, supply and demand is back, that’s when you’ll see the physical stores begin to grow again.