The retail landscape was already under fire. Over the past few years, there was a great deal of change. Bankruptcies and store closings were the norm. Companies such as Payless Shoes and Toys-R-Us went out of business. Companies such as Walgreens closed hundreds of locations.
The coronavirus is basically quarantining people across the world. Big retail property owners such as Simon Properties, the largest mall owner in the United States, closed all their properties until the end of the month.
This has an obvious impact on the retail sector. The stores that are closed will be generating zero in revenues during the shutdown Meanwhile, employees, most of whom are hourly, end up going without an income for the period.
In spite of this, companies such as Amazon, Wal-Mart, and Costco are thriving. With people scared to go out, online sales are taking over. These mega-corporations are starting to accumulate even more market share.
It is a situation that gave Jim Cramer pause. He asked what is these were the only retailers still standing when this crisis passes.
“If we come out of this sooner, then other, small businesses can open. If we come out of this later, there are going to be three retailers in this country,” the “Mad Money” host said. “There’s going to be Amazon. There’s going to be Walmart. And there’s going to be Costco.”
The obvious impact is how badly will small businesses be hurt. This is a vital part of the overall retail establishment. Each store averages $22,000 per month in revenue while employing nearly 40% of the employees in retail. If the big three eliminate this facet of the retail industry, the number of employees working will dwindling rapidly.
Automation is a large part of the mega-retail trade which helps profitability by reducing the need for labor.
The market is reflecting this sentiment by rewarding both Wal-Mart and Costco with near record highs. Amazon is off 13% from its all time high but is outperforming the broader market.
Monopolies never end up well. Throughout the history of the United States, companies that enjoy full or near monopolies end up being abusive. With a trifecta in retail forming, it is vital that we get things back to normal as quickly as possible. Not only are jobs depending upon it but the fate of the retail sector.
Americans are not going to want to operate in a world where they only have a few choices.
Cramer is right, it is a situation that needs to be avoided.
One factor that is going to work to the advantage of everyone, as cryptocurrency expands, we will likely see individual marketplaces popping up catering to the network/economic system they are a part of. This will help to decentralize things greatly as tens of millions of Americans start being rewarded in cryptocurrency.
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