Brick&Mortar Establishments

In the Digital Age

Businesses with buildings complained it was unfair for online businesses to not collect local sales taxes. These businesses ignored the fact, every time you buy something online, you most often have to pay a shipping charge. Yet this legislation came into being (https://nebraskapublicmedia.org/en/news/news-articles/internet-sales-tax-comes-one-step-closer/).

But the pandemic came and forced many people to reconsider their relation to the internet. People learned they could save money and time by ordering groceries and food online. Even Hello Fresh turns out to be cheaper compared to eating out, and results in less food waste (https://www.hellofresh.com/pages/menus-and-plans). To add, some people are losing weight on such plans as portion control is much easier. There are many other such services (https://www.trifectanutrition.com/). Some fill niche markets and provide less expensive options (https://www.misfitsmarket.com/). This means bypassing grocery stores, fast food places and restaurants. Why not just have a great meal at home instead of paying gratuity and taxes?

The digital economy is restructuring how we do everything. This is why commercial properties have become a challenging investment. Some of my readers are strong advocates for a streetcar and say it will promote economic growth and they refer to numbers prior to the pandemic. But after the pandemic, the digital economy is aggressively eroding much of the need for commercial properties (https://money.usnews.com/investing/articles/the-commercial-real-estate-outlook). The problem with the brick-and-mortar establishments is they have too much space and too little inventory. This is why Amazon is so successful. But retailers such as JC Penny’s at the Westroads are fighting back.

Take this shirt for example which is on sale on JC Penny’s website. Yes, I probably could buy it at the store but chances are it will not be in my size or desired color and I would have to hunt it down to find out where in the store it is at. Oh, and finding a staff member merely to help me may be a chore all unto itself. So online I go and find this on sale!

So what of shipping costs and sales tax? If I have them send it directly to me, I lose out on much of the discount. The price basically doubles as the shipping is subject to sales taxes.

Well, there went the savings. But, I have the option to have the shirt sent directly to the store! This is where JC Penny’s is leveraging the power of the internet and a physical store while not having to have every item on inventory in the store. Shipping to store is free!

Also, with the product being shipped to the store, I don’t have to worry about porch pirates stealing the item or having the item dampened by rain. This is protection Amazon cannot offer you. While theft of such items is not much of a problem in Nebraska, it is in many places. Former NASA engineer Mark Rober has found a way to counter such porch pirates.

So here is where reality comes into focus. JC Penny’s could move to a much smaller building with mostly display items and quick-selling products while encouraging customers to shop from the comfort of their own home. In fact, many organizations with commercial properties are looking at downsizing what they have because they realize, the economy has changed. And what is accelerating this trend is high property taxes.