I used to work in retail management and so I have done a lot of analysis on retail competition. You have a lot of great comments about the retail industry. I also use to work at the Department of Labor Bureau of Labor Statistics and so I thought your economic analysis was interesting as well.

Retail Trends

You hit on some key points / trends in retail. One of them being online vs brick and mortar. The other is niche or specialty retail vs general, department store, or big box style retail.

The niche vs general store battle tends to ebb and flow in retail history. Back in the heyday of malls when department stores like Macys, Sears, Nordstrom, and JC Penney were dominant the mall ecosystem was vibrant. The problem is that when stores get really big they try to take advantage of economies of scale and they forget that economies of scale aren't the same as economies of scope.

The giant retailers become victims of their own success. Their broad offering attracts a ton of traffic to the malls as they become a one stop shop for all types of good and they get bigger and broader. The bigger part is not bad, but the broader parts leaves then unspecialized and very vulnerable to stores that are niche.

The success of the giant retailers drove a ton of the traffic to the mall and the next wave of retail was good at exploiting this mall traffic. This class of retailers were niche and subculture brands like Abercrombie, Forever 21, American Eagle, the Gap, Banana Republic, etc. This retail became so hyperspecialized that you saw things like the Gap splitting into three subspecialties--Banana Republic for the richer, the Gap for the middle, and Old Navy for the poorer. You saw lifestyle brands like Holister which is Northern California beach wear and Pacsun which is Southern California beach wear. How specialized do you need to be?

These niche retailers became victims of their own success and took down the rest of the ecosystem with them. The really small niche stores like Abercrombie, American Eagle, Lucky, and the Gap were taking sales from Macy's. The problem is Macy's and the other big box stores are "anchor" stores. They bring in a lot of the foot traffic to the malls and they pay a lot of the rent to the landlords. These small niche stores are killing off the anchor stores which are killing off malls and reducing overall traffic in the ecosystem. This is why competition is good, but parasitic competition is bad.

The next wave of retail has been in "offprice". This is Marshall's, TJ Maxx, Ross, and Nordstrom Rack. These guys are moving back out of niche and back into the general store model. These weren't general enough though. When COVID hit they all got closed down. The most general of stores were Target and Walmart. Those stores not only had clothes, but they had refrigerated food which made them "essential". They were able to stay open while Marshalls and Ross and the rest of the "off-price" had to close.

Brick & Mortar vs Online

Target and Walmart have moved into a new category now that the retail industry calls "Click and Mortar". The are online and they have a physical presence. Amazon has already started trying to move into the Brick and Mortar sector with Whole Foods, partnerships with Kohl's, and Bestbuy. They also have small little physical stores in the Bay Area where you can just walk in and take stuff out of the store and it gets charged directly to your Amazon account with no cashiers.

I think retail competition will look mixed in the near future. Not too generalized and not too niche. Not all online and not all brick and mortar.

The Economy

I thought you brought up a lot of great points and my comments are already too long, so I'll be brief here. I just want to add that retail workers are one of the largest job segments in America. January and February is when we would be letting go all of the Holiday temp workers. Sales in February and March are abysmal, so even fulltime employee hours are cut back at this time.

When stores start to go bankrupt those non temp worker will start losing their jobs. There will be a decline in total jobs and a reduction of hours in the jobs that aren't lost. Online will absorb some of it, but online is too "efficient". This efficiency is great for prices and great for the economy in the long term, but really bad in the short term for cashiers which is the most common retail job.

The loss of one of the most common jobs could lead to a contraction in consumer spending which would lead to a contraction in retail which further causes more stores to shut down and you could find yourself in a reinforcing spiral. The decline in retail leads to a decline wholesale, manufacturing, raw materials, and so on. These retail workers will default on credit cards, student debt, rent, etc. Hopefully, none of this happens ...