Too much retail
“There’s too much retail in the U.S.” – Bruce Berkowitz, The Fairholme Fund
The interview is about value investing and the economic meltdown, not about retail, but that one side comment really caught me. We really do have too much retail in the US.
Lets start with cars. Off the top of my head, Jeep, Eagle, Saturn and Hummer have all been introduced as American brands and Infiniti, Lexus and Acura have all been introduced in the last couple decades. The only brand that actually died that I can think of is Eagle.
During that same time, the US population, and I am assuming the buying public, only increased about 20%.
This is rather tangential logic, but think of all the stores that exist now that didn’t exist 20 years ago. Not only is there a larger variety, the concentration of stores is greater. Twenty years ago you didn’t have Lowes across the street from every Home Depot, outlet malls were in the middle of no where, and the outlet stores only carried defective product and end runs.
Some growth in variety and quantity was justified by population growth, but it looks like the majority of it was our love of the credit card. If the economy contracts to a sane level, we will probably loose a lot of the variety that we have become used to. Instead of Mr. Gatti’s, Pizza Inn, Pizza Hut, Papa John’s and the local guy all offering 30 minute pizzas, we might have to deal with just two.
We have already lost most CompUSA, Oshman’s and Albertson’s to poor management and poor market demand as well as several hundred Starbuck’s to over expansion. I expect we will see more of this contraction, where companies cull the weak performers to build stronger, but much smaller companies. Expansion is no longer king.
Sadly, I have not figured out how to take advantage of this epiphany financially. I certainly don’t want to own a strip center in a low traffic area.