Bank branches are closing, as are stores and shopping malls. The journey towards digital is relentless. Story by Chris Skinner.

We talk a lot about bank branch closures and, to be sure, there are a lot of bank branch closures. The UK has seen one in 10 bank branches disappear over the last two years, while the US is seeing a similar trend, albeit at a slower pace. That may be scary for some as we see bank branches disappearing off the high street to be replaced by our mobile apps, but it’s a clear trend that’s unstoppable. The good news is that it opens up the way for new retail space. But that’s not happening either.

Just looking at the US: visits to shopping malls are declining fast, as more shopping is done online. Visits to US malls declined by 50% between 2010 and 2013, according to the real-estate research firm Cushman & Wakefield. This is especially true if a mall loses an anchor store such as Sears. Once one of the biggies leaves, it’s nearly impossible for the mall to survive, with Green Street Advisors anticipating a third of all shopping malls to close in the next few years. On trend, Macy’s is closing 68 locations in the first half of 2017, JCPenney is closing 138 stores, RadioShack 552 stores, Wet Seal 171 locations, and Crocs is closing 160 locations.

Number of retail stores closing in early 2017. Source: Company data; Business Insider

Shift to digital

What’s really happening here is the dominant shift to digital. It has already hit book stores, travel agents, camera shops, video stores and more, but as anything that can be digitised is automated, the trend is now hitting the physical goods and services of clothes, fashion, shoes and other products. A lot of this is due to the ease of shopping and paying online, and it’s getting easier every day.

Amazon is a clear leader in this space, with its Buy Now button and one-touch checkout. Goods arrive within an hour in some locations, and it’s easier to box and return than make a trip out to the mall. For this reason, shopping from home is the future. You can try the clothes on at home and return them if you don’t like them. You can have a fashion show in your living room, and it’s compulsive. This is one of the reasons why firms such as Amazon and Alibaba have consistently delivered revenue growth throughout their development cycle.

Amazon has consistently delivered revenue growth throughout its development cycle. Source: Statista

Source: Statista.

Amazon has consistently delivered revenue growth throughout its development cycle. Source: The Economist

Alibaba is even more notable as it began as a way to allow mom-and-pop stores across the Chinese mainland to sell their goods and services online. It has adapted since, to keep up with the demands of the ever increasingly sophisticated Chinese consumer, but its heartland was serving small businesses.

And I guess that’s the core development here. The fact that old physical stores and structures are being eaten by software is a given, but new stores and structures are replacing those old physical ones, as digital provides a platform to connect everyone. This means that small businesses are able to get started and grow fast, serving a digital community. This is what Kickstarter, Indiegogo, CrowdCube and more are enabling: the fast development of new businesses, with funding directly from their target markets and customers.

The challenge then is how to take your idea from the garage to a boardroom. More on that in Part Two.

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– This article is reproduced with kind permission. Some minor changes have been made to reflect BankNXT style considerations. Read more here. This particular post is brought to you by Sage Payment Solutions and IDG. The views and opinions expressed herein are those of the author and do not necessarily represent the views and opinions of Sage Payment Solutions. Photo: Cristina Gottardi, Unsplash

About the author

Chris Skinner

Chris Skinner is an independent commentator on the financial markets through the Finanser, and chair of the European networking forum the Financial Services Club, which he founded in 2004. He is an author of numerous books covering everything from European regulations in banking through to the credit crisis, to the future of banking.

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