Was it really Amazon’s fault?
It’s probably too convenient to just say the Internet killed retail. Or at least retail as we knew it. Of course there’s no denying couch-shopping hurt in-store traffic. The real story, though, is a bit more nuanced. From 1970–2015, malls grew at twice the rate of the population. Was there simply too much retail for too few people? You could ask the same of restaurants.
“The resulting closures are less of an unexpected apocalypse and more of a course correction,” says Partners + Napier.
Or as Warby Parker president Neil Blumenthal puts it: “It’s not the end of retail; it’s the end of bad retail.”
Restaurants happily dove into the real-estate gap left behind. One of the biggest drawbacks in this industry, more so than most, is start-up costs. The retail correction eased the dynamic. Barriers to entry were lowered. Landlords were suddenly willing to negotiate terms and many brands and concepts were born. This is especially true of fast casual. Partners + Napier spoke to Sisha Ortúzar, co-founder of ‘wichcraft, a brand fueled by “Top Chef” head judge and renowned restaurateur Tom Colicchio. He said “everything changed” in New York City two years ago. “Suddenly landlords were going out of their way to get tenants and rents definitely adjusted.”
Per data cited by the WSJ, restaurants are also now growing at twice the rate of the population. You could blame investors for this, to some degree. Since the early 2000s, banks, private-equity firms, and other financial-backed powers have poured billions into the food industry. The reason: restaurants are considered by many investors to be more tangible than dot-com start-ups. Many PE firms have also seen success in taking public restaurant companies private, as a rash of M&A activity recently suggests.
The result, however, stirred a familiar pot of issues. Too many options. Too few customers. Not enough money to go around.