Peak Retail

Over the past couple of years I have familiarized myself with the concept of "Peak Oil," and unhappily, I am pretty well convinced by most of the arguments that Peak Oil theorists make. The baseline conditions in our world and especially our country are altering rapidly, and I suspect that from the perspective of the rear-view mirror, 2008 is going to look like the key year that a lot of things began to change for good.

What with all the recent news of retail store closings and bankruptcy filings, it seems, for example, that word is trickling out to Middle America that the era of endless retail expansion is coming to an end. The case that we have passed Peak Retail is easy to make:

1) With the era of cheap gasoline, cheap home heating, cheap airplane travel, cheap food, cheap credit, etc., noticeably on the wane, people will have to concentrate their spending on the most crucial segments of their budgets. Some retail falls within that, but a lot doesn't. (Restaurants and the travel/tourism industry will also be hit hard by all these developments.)

2) Americans are tapped out anyway, near their credit capacity, and their homes are no longer going to be quickly escalating (if at all) in value. Their paychecks certainly haven't been getting much larger, and inflation is back in a big way.

3) The American retail environment is remarkably over-built, with way more square footage per person than you'll find in the rest of the First World, and that over-building only accelerated during the past five years, as over-ambitious developers banked on the party never ending. That unoccupied or deoccupied space will be with us for a long time.

4) As the huge number of Baby Boomers move well past their child-rearing years and into their retirements, their own peak spending years come to an end.

I don't have a solid notion what the future past these peaks looks like; I leave that sort of speculation to James Howard Kunstler and others. But the prospects make me uneasy.

UPDATE (5/14/2009): Not too long ago I encountered a video on Yahoo Tech Ticker in which retail expert Howard Davidowitz gave a refreshingly blunt assessment of the prospects for American retail contraction; he estimated that the amount of retail square footage per person would shrink from an outrageous 19.5 sf (I've seen even higher numbers; it depends on the source) to a still abundant 12 sf. It's not like we wouldn't be shopping, but we might be just a little less insatiable -- first from necessity, then, perhaps, from newly acquired habit. We shall see.

UPDATE (6/21/2009): Lately, every time I visit the Fox River Mall here in Appleton, another store or two has closed, and the "holes" are not being filled; S&K Menswear was a recent casualty (the entire chain was liquidated). Some of the remaining stores are eerily silent. Today, it seemed that half the stores were having 70% off sales. 70% -- think of it. None of the mall anchors have shuttered yet, but if that should happen, it would certainly accelerate the downward spiral; I watched that happen at Washington Commons in downtown Green Bay (which eventually closed altogether). General Growth Properties, the owner of Fox River Mall, filed for bankruptcy on April 16; Eddie Bauer, a long-time tenant here (and still open), filed the other day. Stores in the large retail district around the mall proper (some properties managed by GGP, some not) are folding, too; the large Linens & Things and Circuit City stores sit empty.

Yes, I think we are probably past Peak Retail.