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--:-- Sean Rameswaram: Hello? Hello?
--:-- [Phone rings again]
--:-- Sean Rameswaram: Hi, baby. Hey, Mom. How you doing?
--:-- Sean Rameswaram: Good. I just got home. I'm in a church. Drive-thru mass, and I got home.
--:-- Sean Rameswaram: Nice. Mom, I had a question for you.
--:-- Sean Rameswaram: When was the last time you went to the mall?
--:-- Sean Rameswaram: Even for Christmas, I didn't go.
--:-- Sean Rameswaram: Why don't you go to the mall anymore?
--:-- Mom: Maybe it's closed.
--:-- Sean Rameswaram: I know the stores that are open to the car park, they are open.
--:-- Sean Rameswaram: Someone told me that.
--:-- Sean Rameswaram: JCPenney, I think.
--:-- Sean Rameswaram: Wait, isn't JCPenney, like, over? Like we're going out of business sale.
--:-- Mom: When I worked at the mall, when I worked at Sears, you were at the mall, like you were my most frequent visitor over there.
--:-- Sean Rameswaram: Oh, that's right. I like walking around the mall and just looking through.
--:-- Mom: I used to go off, yes, at Macy's and all.
--:-- Sean Rameswaram: I know the people who work there.
--:-- Mom: Some of these people have been working for years and years.
--:-- Sean Rameswaram: And they recognize me and then they say, Hi, nice to see you again.
--:-- Mom: Now, I don't know even whether they work there anymore.
--:-- Sean Rameswaram: How did knowing them change your experience?
--:-- Mom: Oh, they give you all the discounts.
--:-- Mom: Oh, they say, oh, there's a $5 off coupon.
--:-- Sean Rameswaram: Do you have the coupon?
--:-- Mom: No, then they'll get a coupon from their drawer and say, okay, we'll give it to you and they'll give it to you.
--:-- Sean Rameswaram: It's only if you know them.
--:-- Sean Rameswaram: So despite the human connection that you're certainly losing, do you think everything you need you'll be able to find online for the same prices you did at JCPenney or Macy's?
--:-- Mom: My garden hose pipe burst because it was so hot here.
--:-- Mom: And I went to all the stores.
--:-- Mom: It was so expensive.
--:-- Mom: I was able to get online. Cheaper.
--:-- Sean Rameswaram: So it sounds like you're transitioning smoothly to shopping online instead of going to the mall.
--:-- Sean Rameswaram: We're going to talk about what's happening to all these retail stores in the meantime on the show today, because a bunch of them are folding right now.
--:-- Sean Rameswaram: I'm wondering, have you said goodbye to going to the mall, to going to the big box stores?
--:-- Mom: No, no, no, no. It's not.
--:-- Mom: I don't. I don't. I like talking to people.
--:-- Sean Rameswaram: Well, thanks for talking to me.
--:-- Sean Rameswaram: Okay, take care.
--:-- Sean Rameswaram: Okay, talk to you soon.
--:-- Sean Rameswaram: restrictions, Lord & Taylor joins the other retail casualties, including J.Crew and Neiman Markets.
--:-- Sean Rameswaram: Every one of these department stores is frankly a disaster area.
--:-- Sean Rameswaram: They've been struggling for ages, though.
--:-- Sean Rameswaram: But like so many other long-term trends, the pandemic threw fuel on the fire.
--:-- Sean Rameswaram: Jason Del Rey, you've been writing about retail for Recode.
--:-- Sean Rameswaram: We're a week away from Black Friday, historically the biggest day of shopping in the United States.
--:-- Jason Del Rey: How are the traditional stores looking?
--:-- Jason Del Rey: You now have a long list of department stores that have either filed for bankruptcy or are really on the precipice.
--:-- Jason Del Rey: And I think we haven't really seen the full brunt of what this will mean sort of in a negative light for the U.S. economy on a whole.
--:-- Sean Rameswaram: What exactly happened?
--:-- Jason Del Rey: E-commerce definitely happened, right?
--:-- Jason Del Rey: You also had, coupled with that, the internet in general made it a lot easier to discover brands that you otherwise couldn't have before.
--:-- Jason Del Rey: So department stores were the place you went treasure hunting or discovery shopping.
--:-- Jason Del Rey: When you can go to that brand's website instead, when you can find it on Instagram, on Facebook, you don't need to go into these massive stores.
--:-- Jason Del Rey: And then some of them also were run by private equity that saddled them with debt.
--:-- Jason Del Rey: Sears which also owns Kmart faces a million debt payment.
--:-- Jason Del Rey: Sales at Sears have tanked nearly 60% over the last seven years.
--:-- Jason Del Rey: And if your sales don't recover from the challenge state they were in when private equity bought them, that debt is going to come due at some point and you don't have the money to pay it.
--:-- Sean Rameswaram: Sears is the latest retail giant to announce that the company has filed for Chapter 11 bankruptcy.
--:-- Jason Del Rey: And then the pandemic hits and everything becomes that much more challenging?
--:-- Jason Del Rey: Yeah, I mean, basically, you're forced in many cities, many states to close your stores.
--:-- Jason Del Rey: And if you're already struggling to stay afloat, you're really screwed.
--:-- Sean Rameswaram: How many jobs are we losing as a result of this sort of decimation of American retail?
--:-- Jason Del Rey: So it's easy to see hundreds of thousands in the near term.
--:-- Jason Del Rey: Long term, you're looking definitely in the millions.
--:-- Jason Del Rey: And what you have in department stores, salespeople on the floor or merchandisers who have been in these roles for, I don't know, 10, 20, 30 years.
--:-- Jason Del Rey: And it's not like they're going to leave and go find another department store sales job.
--:-- Jason Del Rey: It's really sad.
--:-- Sean Rameswaram: And so you look at who's hiring in this country, and in a weird, ironic twist, it's Amazon just announcing recently 100,000 new employees they're hiring.
--:-- Jason Del Rey: You know, it's e-commerce in general, which means not a sales job where you're interacting with people.
--:-- Jason Del Rey: And it's not a sales job where you're making 6% to 10% commission for every fridge or washing machine you sell.
--:-- Sean Rameswaram: That's a great point.
--:-- Sean Rameswaram: I was actually talking to someone recently, and they were telling me still at a high-end chain like Neiman Marcus, you have salespeople work there a couple of decades, and they have their best go-to customers, and they're making a lot of money in commission.
--:-- Jason Del Rey: That's not the norm, but those jobs are going away.
--:-- Sean Rameswaram: What about all these storefronts?
--:-- Sean Rameswaram: I mean, I live pretty close to a strip mall in DC, and there's this Models sporting goods store there before the pandemic that's just empty and deserted now?
--:-- Jason Del Rey: No signs about what's coming to replace it as far as I can tell?
--:-- Jason Del Rey: The ugly truth is there's just going to be a lot of empty store space for a considerable period of time.
--:-- Jason Del Rey: Even before the pandemic, people in the retail industry knew full well that the US was, what they would say in the retail industry, overstored.
--:-- Jason Del Rey: Just way too many stores.
--:-- Jason Del Rey: As suburbs exploded, you get mall after mall, and then dynamics change, society change, people go back into cities, but those stores are still there.
--:-- Jason Del Rey: In the near term, you're going to have rents being cut and you're going to have empty storefronts.
--:-- Jason Del Rey: Longer term, you will get some young and upcoming brands who realize it's good to have some physical store footprint if they sell stuff that people still want to see and touch before they buy them.
--:-- Jason Del Rey: But you are also going to see things like e-commerce companies using some stores as delivery hubs.
--:-- Jason Del Rey: And when I think of like, you know, the Neiman Marcus's and JCPenney's and Sears's and Macy's of the world, I think about like the sort of pillars and sort of, you know, bookends of every major mall in the country, if not the continent, like what happens to malls without these department stores?
--:-- Jason Del Rey: I wish I had better news, but it's really a rough situation.
--:-- Jason Del Rey: You know, you were seeing before the pandemic malls starting to bring in what they would call like experiential retail to take over where department stores failed.
--:-- Jason Del Rey: So that means restaurants.
--:-- Jason Del Rey: Or I live right by this mega mall entertainment complex with an amusement park inside.
--:-- Jason Del Rey: Is this a mall or a theme park?
--:-- Jason Del Rey: Turns out, both.
--:-- Jason Del Rey: They were opening just this past year, so they are in terrible shape.
--:-- Jason Del Rey: The American Dream Mall in East Rutherford, New Jersey, just outside New York City, is now open.
--:-- Jason Del Rey: And get this, they have an indoor ski and snowboard park.
--:-- Jason Del Rey: This was supposed to be the future of malls was you go there for entertainment, for drinks, for food, and then, yeah, you stop by Macy's and pick up socks for the kids.
--:-- Jason Del Rey: I think some of these malls are hoping that a vaccine comes and a year from now, people want to be in crowded spaces eating and drinking.
--:-- Jason Del Rey: Maybe there are some of those people now.
--:-- Jason Del Rey: And I think they're going to really lean on some of these popular e-commerce brands and try to sell them on why they should have a flagship store in the big mall in Garden State Plaza in New Jersey near me.
--:-- Jason Del Rey: So all of the tweens and teens of America are going to have to go to hottopic.com instead of just going to the one in the mall and seeing all their friends there?
--:-- Jason Del Rey: Listen, I think malls, premium malls on the high end that cater, frankly, to people with a lot of disposable income, I think some of those will still survive.
--:-- Jason Del Rey: And then, yeah, my 16-year-old niece is going to be buying Hot Topic through Instagram checkout.
--:-- Jason Del Rey: It really hard to tell right now whether the cultural aspect of malls that some of them still had when it comes to young people congregating like how quickly that comes back or if it does.
--:-- Jason Del Rey: Jason, it's almost becoming like a popular refrain on this show that the pandemic has accelerated trends we were already seeing.
--:-- Jason Del Rey: But by and large, was the American shopper ready to stop going to stores to shop?
--:-- Jason Del Rey: I think segments of the population was.
--:-- Jason Del Rey: What'll prove that is if, you know, six months from now, these crazy e-commerce numbers are still there, right?
--:-- Jason Del Rey: If my friend's 68-year-old mom who'd never heard of Instacart before the pandemic is now a loyal once a week Instacart shopper, like, yeah, that's one anecdote.
--:-- Jason Del Rey: But those anecdotes stitched together is what we're seeing in the e-commerce data right now.
--:-- Jason Del Rey: So I think a lot of people just didn't know they were ready.
--:-- Jason Del Rey: But I do want to make a point, like there is room for cool physical retail.
--:-- Jason Del Rey: But the difference is like you really need people to have a reason to come in your door, like a product they can't find, some type of cool experience.
--:-- Jason Del Rey: Like if I'm going to get my butt out of my seat from behind my computer into a car and go to a store, like got to deliver for me.
--:-- Sean Rameswaram: a minute to set up.
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--:-- Sean Rameswaram: Jason, whenever there's a bunch of losers, there's a bunch of winners.
--:-- Sean Rameswaram: Who's winning right now?
--:-- Jason Del Rey: The big bad retailers who are also good at e-commerce like Walmart and Target, who were allowed to have their physical stores open during the pandemic because they were, can't see my air quotes, but essential.
--:-- Jason Del Rey: They sold stuff you need to exist like food.
--:-- Jason Del Rey: Old Navy is a company that their sales this year are maybe just down a few percentage points from last year.
--:-- Jason Del Rey: And that's for a couple of reasons.
--:-- Jason Del Rey: People are not going to work.
--:-- Jason Del Rey: What are they wearing? They're wearing sweats.
--:-- Jason Del Rey: And I don't know what you're wearing.
--:-- Sean Rameswaram: I'm wearing a three-piece suit, Jason.
--:-- Jason Del Rey: I don't know about you.
--:-- Jason Del Rey: Okay. Sorry.
--:-- Jason Del Rey: Sorry.
--:-- Sean Rameswaram: All good.
--:-- Jason Del Rey: They and their parent company, Gap, they also got into mask making very quickly.
--:-- Jason Del Rey: And Old Navy has also done okay because their website is a pretty good functioning e-commerce site.
--:-- Jason Del Rey: They would not say this has been good for their business, but they have been able to tread water and we'll see the other side.
--:-- Sean Rameswaram: And then, of course, you have Amazon.
--:-- Sean Rameswaram: We're going to start with an earnings alert.
--:-- Sean Rameswaram: It's Amazon, the stock touching new all-time highs.
--:-- Sean Rameswaram: This is reporting a blowout quarter.
--:-- Sean Rameswaram: Earnings and revenues both topping expectations.
--:-- Sean Rameswaram: Amazon grew something like 40-something percent from last year at their size.
--:-- Sean Rameswaram: That is a crazy, crazy number.
--:-- Sean Rameswaram: For every penny of wealth in the middle of the country, That's like Jeff Bezos, the richest man in America, finding $11,700.
--:-- Sean Rameswaram: Walmart, their online sales were up 100%.
--:-- Sean Rameswaram: Target, I think close to 200%.
--:-- Sean Rameswaram: You also have some other companies, like I mentioned, Instacart, which is still a relatively young company.
--:-- Sean Rameswaram: I think it's been around less than 10 years.
--:-- Sean Rameswaram: But suddenly no one wanted to go into a grocery store.
--:-- Sean Rameswaram: And so overnight, they became one of the leaders of grocery delivery.
--:-- Sean Rameswaram: We'll probably see them as a public company, I'd say in the next two years.
--:-- Sean Rameswaram: Then you have a company like Shopify, which is not a consumer facing brand, but they are a software player that is a huge public company now.
--:-- Sean Rameswaram: And they make it possible for just any small business from your local bakery to a local sneaker store to sell online and get it up and running super quickly.
--:-- Sean Rameswaram: So it sounds like the brands that were able to really weather this storm better than most were the ones that had online infrastructure already set up.
--:-- Sean Rameswaram: Were there any major pandemic innovations that we might see more of as more of our shopping is trending online?
--:-- Jason Del Rey: Yeah, so one that comes to mind right away, it's not super sexy, but it's called curbside pickup.
--:-- Jason Del Rey: When it comes to sexy and technology, like drones is something that's been talked about for a while.
--:-- Jason Del Rey: Of course, the rise of the machines.
--:-- Jason Del Rey: And these are delivery drones.
--:-- Jason Del Rey: If you're ever bored, you should search drone into Amazon's patent library.
--:-- Jason Del Rey: I don't know if you'll ever get that bored, Sean, but...
--:-- Sean Rameswaram: Maybe this winter.
--:-- Jason Del Rey: Amazon has a ton of patents for drones.
--:-- Jason Del Rey: Drone warehouses, floating warehouses, drones that attach to each other.
--:-- Jason Del Rey: Anyway, the point is, there will be a day where some people in some parts of the country will get stuff delivered by drone.
--:-- Jason Del Rey: I think just recently, Amazon finally got an approval to do some of this testing.
--:-- Jason Del Rey: Walmart announced their own drone partnership.
--:-- Jason Del Rey: It's a weird battle of the drones between two big retailers.
--:-- Jason Del Rey: But that is something that we're going to see.
--:-- Jason Del Rey: In China, there's already deliveries happening in drones.
--:-- Jason Del Rey: Australia, Google's doing some stuff there.
--:-- Jason Del Rey: And so you will be able to get light things delivered to you by drone.
--:-- Jason Del Rey: Call it in the next decade.
--:-- Jason Del Rey: Maybe even faster.
--:-- Sean Rameswaram: Okay, so we got drones.
--:-- Sean Rameswaram: What other robot stuff is ahead?
--:-- Jason Del Rey: In a place like Walmart, you have robots that are going to and have already started packing grocery bags, which there's a business case for, but maybe there's also a convenience case.
--:-- Jason Del Rey: And you're going to have autonomous delivery vehicles at some point.
--:-- Jason Del Rey: It's kind of the sad state of consumerism in the US in some ways that we're all about speed, convenience, and how fast you can get me what I want when I need it at the tap of a button.
--:-- Jason Del Rey: But that's the way a lot of the industry is going.
--:-- Jason Del Rey: And so you're seeing a lot of the technology geared toward that.
--:-- Jason Del Rey: So autonomous delivery vehicles, they're coming too.
--:-- Jason Del Rey: Apart from the robots, we have AR, otherwise known as augmented reality.
--:-- Jason Del Rey: Like the stuff on Snapchat or Instagram, like funny filters for your face.
--:-- Jason Del Rey: Except more like, does this couch actually fit in my apartment next to my bed?
--:-- Jason Del Rey: Because I live in 350 square feet in Bushwick.
--:-- Jason Del Rey: When it comes to trying to get people to buy stuff online that costs a lot of money and also needs to look good in their homes, and it's hard to ship.
--:-- Jason Del Rey: So you may not get free returns on it.
--:-- Jason Del Rey: That's sort of like AR's sweet spot.
--:-- Jason Del Rey: But I think there'll be all sorts of other use cases.
--:-- Jason Del Rey: For a while, it was like VR, like you're going to put on goggles and then you're going to like, I don't know, swipe your finger in the air and figure out which shirt looks better on you.
--:-- Jason Del Rey: I'm a little more skeptical about that.
--:-- Jason Del Rey: But if it's one of the R's, it's going to be AR, not VR.
--:-- Sean Rameswaram: No disrespect for our, you know, proximate robot overlords, but do you think, like, for all the people like my mom, who like going to a store, like going to a mall, trying something on, talking to someone, buying a thing, you know, cracking a smile from a human interaction, is there hope for those people?
--:-- Jason Del Rey: I think so.
--:-- Jason Del Rey: I think you're going to have, you know, less selection where you go.
--:-- Jason Del Rey: and have those experiences.
--:-- Jason Del Rey: I guess the hopeful side of it from a consumer perspective is that the retailers who remain will be the ones that actually are offering the best products, the best service at the best price.
--:-- Jason Del Rey: And so you're less likely to walk in and have sort of a disappointing or bad experience.
--:-- Jason Del Rey: This is putting aside the whole labor issue.
--:-- Jason Del Rey: This is talking from the customer perspective.
--:-- Jason Del Rey: I think there will be store experiences that exist.
--:-- Jason Del Rey: There will be fewer of them.
--:-- Jason Del Rey: Hopefully they will be better experienced.
--:-- Jason Del Rey: But typically more choice is better for consumers and for competition.
--:-- Jason Del Rey: And so I do worry that with less choice in the physical world, it just gives rise to stronger, more concentrated power.
--:-- Sean Rameswaram: Jason Del Rey. He's a reporter at Recode and the host of the first season of the Land of the Giants podcast.
--:-- Sean Rameswaram: It's all about the rise of Amazon.
--:-- Sean Rameswaram: I'm Sean Rameswaram for him.
--:-- Sean Rameswaram: This is Today Explained.
--:-- Sean Rameswaram: Thank you.
