A Blog by Jonathan Low


May 2, 2020

How the Pandemic Will Change American Retail Forever

Stores and restaurants, especially in big coastal cities that became the center of the social universe over the past two decades will become as monochromatic as the suburbs from which their hip customers fled.

As few as 30% of such establishments, which gave neighborhoods their eclectic, exciting vibe, are likely to survive. The good news is that cheaper urban areas may eventually attract the artists, entrepreneurs and misfits that made them so interesting in the first place. JL

Derek Thompson reports in The Atlantic:

Big companies will get bigger, many mom-and-pop dreams will burst, chains will proliferate and flatten the idiosyncrasies of neighborhoods, more economic activity will flow into e-commerce, and restaurants will undergo a transformation unlike anything since Prohibition. Most small retailers have less than one month’s cash on hand. 30% expect to survive a lockdown. Restaurant spending has fallen 60%. Chains have taken $3 out of every $4 spent eating out. If cities become less desirable in the next few years, they will also become cheaper to live in. In time, more affordable rents could attract more interesting people, ideas, and companies.
Last weekend, I walked a mile along M Street in Washington, D.C., where I live, from the edge of Georgetown to Connecticut Avenue. The roads and sidewalks were pin-drop silent. Movie theaters, salons, fitness centers, and restaurants serving Ethiopian, Japanese, and Indian food were rendered, in eerie sameness, as one long line of darkened windows.
Because the pandemic pauses the present, it forces us to live in the future. The question I asked myself walking east through D.C. is the question so many Americans are all pondering today: Who will emerge intact from the pandemic purgatory, and who will not?
In the past three weeks, I’ve posed a version of that question to more than a dozen business owners, retail analysts, economists, consumer advocates, and commercial-real-estate investors. Their viewpoints coalesce into a coherent, if troubling, story about the future of the American streetscape.
We are entering a new evolutionary stage of retail, in which big companies will get bigger, many mom-and-pop dreams will burst, chains will proliferate and flatten the idiosyncrasies of many neighborhoods, more economic activity will flow into e-commerce, and restaurants will undergo a transformation unlike anything the industry has experienced since Prohibition.
This is a dire forecast, but there is a glimmer of hope. If cities become less desirable in the next few years, they will also become cheaper to live in. In time, more affordable rents could attract more interesting people, ideas, and companies. This may be the cyclical legacy of the coronavirus: suffering, tragedy, and then rebirth. The pandemic will reset our urban equilibrium and, just maybe, create a more robust and resilient American city for the 21st century.


To see how the pandemic is already reshaping American retail, you don’t even have to go outside and count storefronts. Your receipts and credit-card statements tell the whole story.
On Thursday, the U.S. Commerce Department reported that retail spending in March collapsed by the largest number on record. Travel spending—including on airlines, hotels, and cruises—is down more than 100 percent, if you include refunds. Department stores and clothing stores are facing an extinction-level event after having experienced years of decline. Pockets of resiliency and even strength include grocery stores and liquor stores, which in March had their best month of growth on record. Home-improvement spending is up as well.
Some of these changes are violent interruptions to modern life, like the closing of gyms and cessation of sit-down restaurant service. But in the long term, COVID-19 probably won’t invent new behaviors and habits out of thin air as much as it will accelerate a number of preexisting trends.

One obvious example is that the pandemic is accelerating the retail reckoning. Over the past 50 years, the number of American malls grew almost twice as fast as the U.S. population, to the point that in 2015, the U.S. had 10 times more shopping space per capita than Germany. Such abundance makes no sense in the age of Amazon. Overleveraged, overbuilt, and oversprawled, American retailers had a long way to fall as the country moved toward online shopping. In 2017, and again in 2019, physical-store closures reached an all-time high, led by the decay of suburban totems like Sports Authority and Payless.
The year 2020 may bring the death of the department store, marking the end of that 200-year-old retail innovation after decades of decline. Macy’s has furloughed more than 100,000 workers. Neiman Marcus has filed for Chapter 11. More legacy department stores and apparel retailers will almost certainly follow them to bankruptcy court or the corporate graveyard. As these anchor stores shutter, hundreds of malls that were already wobbling in 2019 will be knocked out in 2020.
The pandemic will also likely accelerate the big-business takeover of the economy. In the early innings of this crisis, the most resilient companies include blue-chip retailers like Amazon, Walmart, Dollar General, Costco, and Home Depot, all of whose stock prices are at or near record highs. Meanwhile, most small retailers—like hair salons, cafés, flower shops, and gyms—have less than one month’s cash on hand. One survey of several thousand small businesses, including hotels, theaters, and bars, found that just 30 percent of them expect to survive a lockdown that lasts four months.
Big companies have several advantages over smaller independents in a crisis. They have more cash reserves, better access to capital, and a general counsel’s office to furlough employees in an orderly fashion. Most important, their relationships with government and banks put them at the front of the line for bailouts.
The past two weeks have seen widespread reports of small businesses struggling to secure funds from the federal government. Larger companies do not seem to be experiencing the same delays. In one particularly controversial case, Ruth’s Chris Steak House—a public company with 159 locations and $87 million of cash on hand—announced that it had secured $20 million from a small-business rescue program that ran out of money before it could help countless independents. (Ruth’s Chris later pledged to return the money, and the federal government replenished the pot, though it will likely run out again quickly.)
These preexisting strengths will continue to matter during what will likely be a shaky recovery. As stores face new demands—like the installation of temperature-taking devices at entries, or additional sanitation controls—larger companies will have the resources to invest without becoming insolvent.
What’s more, by holding on through the next few months, America’s largest companies will be in a stronger position to incorporate millions of workers when the recovery picks up. “In the medium run, it’s probably going to be larger companies and chains doing the hiring,” Arindrajit Dube, an economics professor at the University of Massachusetts at Amherst, told me. In fact, at a time when the economy is shedding several million jobs per week, Amazon, Instacart, Walmart, Dollar General, Walgreens, and Kroger collectively have job postings for more than 700,000 full-time employees or contract workers. In the David-versus-Goliath battle between big and small businesses in America, COVID-19 is, contrary to New York Governor Andrew Cuomo’s recent assessment, no “great equalizer.” It’s a toxin for underdogs and a steroid for many giants.


The growth of online shopping and big business will be hard to ignore for many city residents. It will make cities feel more desolate and less singular, for the next year or longer.
As e-commerce grows, it will pull more stores out of ground-floor retail locations. Many of these spaces will stay empty for months, removing the bright awnings, cheeky signs, and crowded windows that were the face of their neighborhood. Long stretches of cities will feel facelessly anonymous. With fewer independent stores and more Americans working from home, the streets will be quieter, too. Some urban residents might enjoy the feeling of a half-filled city; it will carry the eerie vibe of an awkward, permanent holiday. But even those cheered by the ample sidewalk room will find, in the darkened windows to their left and right, a shadow of the city they knew before the plague.
While mom-and-pops and department stores will close, those industries that survive and are resilient to e-commerce encroachment—such as grocers and restaurants—are more likely, in the short term, to be dominated by chains that survive the flood. Cities will still be convenient, but their conveniences will be homogenous: a dependable array of CVS locations, bank branches, fast-casual franchises, and coffee shops. (This development is not entirely new: From 2008 to 2018, New York City added a new Dunkin’ Donuts franchise approximately every 12 days.) Everything that urban residents typically despise about chains—their cold efficiency, sterility, and predictability—may come to feel like mixed blessings during a period when people feel stalked by murderous pathogens.

For decades, American cities have fought a battle against monotony, and, according to some, the war was lost long ago. It was Tennessee Williams who allegedly said, “America has only three cities: New York, San Francisco, and New Orleans. Everywhere else is Cleveland.” In a period where many mom-and-pop stores die and chains expand, it seems inevitable that what once separated the New Yorks and San Franciscos will be flattened through the mass commodification of the streetscape, as everywhere you go feels even more like everywhere you’ve been.
A steep drop in immigration could also homogenize the urban experience.
President Trump seems to want to stop immigration to the U.S. entirely, and the administration has now closed the southern border to migrants. Many Central American countries have implemented domestic curfews, making most border crossings impossible. But even without these measures, the pandemic has effectively frozen international travel and migration.
Curtailed immigration will hurt immigrant families and communities first and foremost. It will also change the face of American cities. Immigrants aren’t just more likely to start companies than native-born Americans. The companies they start are twice as likely to be restaurants and retail outlets like bodegas and nail salons. In some places, like San Jose, California, 60 percent of all new companies, including new restaurants, are started by immigrants, according to research by the economists William Kerr and Sari Pekkala Kerr.
“If we shut the door on immigration because of the pandemic, something important will be lost on American streets,” William Kerr told me. “What’s obvious is that this will be really bad for immigrant communities and for people who live in cities. What’s less obvious, but also important, is that talent flows to these cities because of these amenities. If immigrants in New York suffer, that makes the city less attractive to young immigrants, but it also makes the city less hip-seeming to some 20-something in Albany thinking about moving.”
If the pandemic has a strong hangover effect on global migration, American cities like New York, Los Angeles, and Miami will not be the same. And nowhere would the absence of new immigrants be felt more in our cities than in the restaurant industry, which is perhaps facing the most serious crisis of all.


Exactly 100 years ago, the U.S. dining industry faced its first extinction-level event with the ratification of the Eighteenth Amendment, which banned the production and sale of alcohol.
While it lasted only about a decade, Prohibition cast a long shadow over the restaurant landscape. The war on alcohol forced hundreds of fine-dining establishments to shut down, by eliminating their most dependable source of profit. The number of restaurants in the U.S. still tripled in the 1920s, in part due to the rise of “lunch car” diners that specialized in food that kids could enjoy with their sober parents, like hot dogs, hamburgers, and milkshakes. As the economist Tyler Cowen explained in his book An Economist Goes to Lunch, the ban of alcohol sales put children at the center of our culinary culture. For decades, he contended, Prohibition infantilized the American palate, making every meal fit for a kid.
Over the past few decades, U.S. restaurants have become world class. Dining out in America has become a kind of art form, leading the writer Eugene Wei to declare, in 2015, that “food has replaced music at the heart of the cultural conversation.” Food critics have noted a restaurant renaissance in Portland, OregonNew OrleansSan FranciscoChicagoWashington, D.C.Los Angeles; and New York City. Honoring this achievement, Americans before the crisis spent more money dining out than in grocery stores—something that had never happened before 2015.
But COVID-19 could bring this golden age to an abrupt close. OpenTable reservations have collapsed all the way to zero. Restaurant spending has fallen by about 60 percent across the country, with the sharpest declines in fine-dining, lunch, and late-night food. The situation is especially bad for independent restaurants. “There’s no question that mom-and-pops have disproportionately suffered during this time,” said Jack Li, the managing director for Datassential, a food-and-beverage-research firm.
In the past month, chains have taken $3 out of every $4 spent eating out. That figure is significantly higher than average, according to Datassential. Chains don’t just have more cash flow; they also have more cash savings. The typical local burrito joint barely has enough money to cover a few weeks of employee pay and utilities. Chipotle, meanwhile, has public stock and more than $900 million on hand. The companies that survive the recovery will be those that can hold their breath, with or without government assistance, and there is no doubt that chains have a significant advantage in lung capacity.
Things may get even worse this summer when restaurants are open for business but customers are scared—or local laws require dining establishments to operate at 50 percent capacity. “A lot of restaurants might come back in June and realize they can’t make a profit all summer, during their peak season,” said H. G. Parsa, a restaurant consultant and professor at the University of Denver. Most people I spoke with expected cities to enact social-distancing rules that will limit restaurant capacity in order to discourage large crowds. Several chains are saying they plan to stagger seating and reduce the number of tables in their establishments. Others are talking about installing dividers between booths or adding temperature checks at the door.
Empty space is bad enough for downtown restaurants, where thin margins require filling every square inch with paying customers. But at a deeper level, these adaptations will create a whole new ambience, making restaurants more awkward, more expensive, and less fun. One of the joys of getting a drink in a crowded space is the soundtrack of a hundred strangers’ conversations humming underneath the intimacy of a private exchange. Social-distance dining prohibits the thrum of a full house. “Until there’s a vaccine, I don’t think dine-in restaurants and bars will get anything back to normal in this country,” Steve Salis, a Washington, D.C.–based entrepreneur who owns several restaurants, told me.
“I think that retail capacity will be reducedrelocated, and repurposed,” said Daniel O’Connor, a veteran retail adviser and visiting executive at the Harvard Business School. Reduced means that thousands of restaurants will go out of business. “Flat out, I’m telling you a lot of today’s restaurant locations are going to become gyms,” O’Connor said. Relocated means that many restaurants that hang on will recognize in the next few months that they can’t survive in expensive downtown areas. They’ll look to open new locations in the suburbs, or shift their business to a food truck.
Repurposed means the restaurant of 2010 isn’t going to be the restaurant of 2025,” O’Connor said. “The pandemic is going to accelerate the shift to contactless delivery of meals, groceries, and products of all kinds.” As more restaurants recognize that they cannot make rent by filling hygienically spaced seats, they will become, simply, for-profit kitchens—a place where food is prepared but less commonly eaten.
Once again, this shift was already happening slowly, but is being accelerated by the pandemic. Last year I wrote that given the growth of “off premise” dining, 2020 would likely be the first year that American restaurants made more than half of their revenue from delivery, drive-through, and takeout. Nobody could have predicted that this milestone would be reached due to the absolute zeroing-out of on-premise dining.
Like Prohibition did 100 years ago, a delivery-first restaurant business could change the American palate. Pizza and Chinese food are well positioned for the transition, since they already account for 70 percent of the U.S. delivery market, according to a report by the investment firm Cowen and Company. But not every entrée is made to be left in a car for 30 minutes. Grilled salmon and medium-rare steak don’t benefit from a microwave zap. Neither do Michelin-star entrées, which is why some of America’s most famous restaurants have gone back to basics. Alinea in Chicago has scrapped its $395-per-person menu and replaced it with comfort foods, like beef Wellington and mashed potatoes. In a strange historical rhyme, the kid-friendly fare that became hegemonic in the American diet after Prohibition isn’t so different from common delivery food: pizza, wings, burgers, and pasta.
It would be glib to suggest that most restaurants can survive by simply pivoting to delivery. Indeed, many won’t—and not just because some consumers might be afraid of lukewarm trout. The bigger problem is that the most popular delivery items (appetizers and entrées) tend to be the least profitable, while delivery consumers rarely order the higher-margin items, like dessert and booze, that actually pay the rent.
One solution: takeaway booze. “I’ve spoken to lots of restaurants who say that alcohol delivery has saved their company,” H. G. Parsa, of the University of Denver, told me. “I think there is room for innovation here. Imagine a restaurant delivers to you the ingredients for a fancy cocktail, with the right amounts of each ingredient, with instructions for you to shake it up yourself.” Parsa sees this approach—half delivery, half DIY—as a possible evolution for more restaurants that want to expand their delivery business. It is a vision of restaurants as prepared grocers, from whom you might order several finished sides, the bottled ingredients for three cocktails, and a sirloin you’ll sear at home.Summarizing these dizzying changes to the food industry, Parsa said: “Food that travels is the future.” As sweeping as that statement is, it might even be an understatement. In the past month, the all-delivery economy has gone from a notion to a necessity.


The spatial logic of a plague is unforgiving. If crowds are toxic, then stores cannot be crowded. And if stores are off-limits to the masses, then mass commerce must shift to the internet.
In the past month, online shopping has gone from a regular habit for a minority of consumers to a crucial part of America’s recreational infrastructure. One-third of Americans bought groceries online in the past month, and tens of millions of them did it for the first time. Walmart deliveries have skyrocketed, and Amazon now delays deliveries of nonessential items to deal with unprecedented demand. Online shopping’s share of total retail sales has been increasing approximately one percentage point per year, but a recent UBS analysis predicted that COVID-19 will immediately increase that share from 15 percent to 25 percent—a decade of change concentrated in several months.
Dan O’Connor, of Harvard, believes “offline” activity will increasingly be geared to online delivery, and will transform almost every aspect of urban retail. He pointed me to Hema, a Chinese supermarket chain operated by the e-commerce and technology giant Alibaba. Hema triples as a high-end grocer, restaurant, and fulfillment center. When you walk into a typical store, it looks like a Kroger or Whole Foods. But Hema delivers more than half of its volume through an app, making it more like a walkable fulfillment center than a traditional grocer. “If you asked me where retail is headed, I would encourage you to look at China,” O’Connor said. “If we’re going through 18 months of social distancing, which makes crowded stores impossible, then we need to significantly repurpose our retailers for increased delivery.”
This all-delivery economy will require either a quantum leap in autonomous vehicles and drone technology or a significant increase in delivery workers. In the short run, I’m betting on the latter. Instacart is currently seeking to add 300,000 contract workers in the next three months—more than the total anticipated new hires by Amazon, CVS, Walmart, and Walgreens combined. The delivery industry, including not only Instacart but also Uber Eats and DoorDash, has received substantial criticism for its treatment of workers, who are typically denied benefits like health care and paid leave. If social distancing accelerates the delivery economy, it will also expedite policy conversations over how to adequately compensate the essential workers who are allowing Americans to remain safely distanced.
By obliterating the face-to-face economy, the coronavirus will return Americans to a blend of virtual commerce and home prep that is reminiscent of the late 19th century. In the 1890s, Sears, Roebuck delivered a bible of goods to the doorsteps of families who cooked at home. In the spring of 2020, Amazon and its ilk deliver an infinitude of stuff to the front steps and mailrooms of families who couldn’t dine out even if they wanted to.
The return to the Sears economy will chill the kinetic energy of downtown areas. Cities are built for touch, yet we are entering an era of what Tim Wu, a law professor at Columbia University, calls virtually assisted “touchlessness.” Movie theaters, crowded gyms, full-capacity stadiums, packed clubs and bars—all of these features of urban life will have to be paused, or downsized, to reduce viral spread.In a plague, the social returns to density flip from positive to poisonous. In the next few years, some people who can work remotely at tech, media, and marketing companies may try to save money by moving their living-room office to the suburbs. Young college graduates may feel that moving to a city with dense public transportation is an untenable risk. Or they’ll decide that “socially distanced downtown” is an unappetizing oxymoron. If they do move to America’s largest metros, they may prefer those—like Nashville and Phoenix—where distance is already designed into the city’s sprawling infrastructure.


The song of American urbanization plays on an accordion. Americans compressed themselves into urban areas in the early 20th century. By mid-century, many white families were fanning out into the suburbs. Then, in the early 21st century, young people rushed back into downtown areas. But in the past few years, American cities have begun to exhale many residents, who have moved to smaller metros and southern suburbs. As with so many other trends, the pandemic will accelerate that exodus. Empty storefronts will beget empty apartments on the floors above them.
The American cities waiting on the other side of this crisis will not be the same. They will be “safer” in almost every respect—healthier, blander, and more boring, with fewer tourists, less exciting food, and a desiccated nightlife. The urban obsession with well-being will extend from cycling and salads to mask design and social distancing. Many thousands of young people who might have giddily flocked to the most expensive downtown areas may assess the collapse in living standards and amenities and decide it’s not worth it. Census figures will show that the urban exodus went into hyperdrive in the COVID years. There will be headlines exclaiming the decline of the American city or, more punchy, “Americans to New York: ‘Drop Dead.’”
Then something interesting will happen. The accordion will constrict again and American cities will have a renaissance of affordability.
“Right now, you see rich people literally fleeing New York for their upstate homes,” Jeremiah Moss, the author of the book Vanishing New York, told me. “What’s happening to New York is traumatic, and strange, and post-apocalyptic. But I reserve a dark optimism about all this, if cities become less expensive over the next few years.”
In the decade after the Great Recession, American cities became very popular—and very expensive. Neighborhoods that were once jewel boxes of eccentricity became yuppie depots. Wealth elbowed out weirdness, and rents soared to suffocating levels that pushed out many of the families and stores that made the cities unique.
“Cities have historically been places for outsiders, but they became ruinously expensive in the last decade when they became popular with mainstream people,” Moss said. “If cities become less expensive in the next few years, it might allow artists and weirdos and the counterculture to come back to New York and places like it. It could make cities interesting again.”
As Moss spoke, I thought of a forest fire that rages through the underbrush and leaves a legacy of ash. To look at the aftermath of the fire is to see little but death and ruin. But in time, the equilibrium of the environment is reset. Sunlight reaches the forest floor. New things grow that couldn’t have before the fire changed the landscape.
The COVID-19 pandemic will leave two legacies for the American streetscape. In the next few years, the virus will reduce to rubble many thousands of cherished local stores. Chains will surge, restaurants will feel desolate, and the density of humanity that is the life force of cities will be ruinously arrested by the disease.
But the near death of the American city will also be its rebirth. When rents fall, mom-and-pop stores will rise again—America will need them. Immigrants will return in full force when a sensible administration recognizes that America needs them, too. Cheaper empty spaces will be incubators for stores that serve up ancient pleasures, like coffee and books, and novel combinations of health tech, fitness, and apparel. Eccentric chefs will return, and Americans will remember, if they ever forgot, the sacred joys of a private plate in a place that buzzes with strangers. From the ashes, something new will grow, and something better, too, if we build it right.


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