Death of the Taller

One of the most common sights these days around the streets of Barcelona are storefront signs reading, "Liquidación de stock." Another taller, or small independent retailer, going out of business.

Maybe the surprise shouldn't be that they're going under but that they weathered the assault from big box retailers, national chains, and e-commerce for so long. This can be attributed to two factors:

1. Big-box sellers and chains (lumping together such diverse companies as El Corte Inglés, FNAC, Decathlon, Zara, etc.) are a relatively recent phenomenon. And Spain still requires national chains to close on Sunday and some Saturdays to protect the little guys. El Corte Inglés grew mainly from 1995-2005. Compare that to Wal-Mart, whose explosive growth period was 15 years earlier.

2. Spain has not been quick to adopt e-commerce. A recent white paper from Oracle says Spanish consumers (along with French) exhibit very low satisfaction levels with e-commerce compared to German, UK, and Benelux consumers. Hence e-commerce's share of total retail in Spain is a paltry 0.06% of total retail sales - 1/6 that of the UK, for instance - and data suggests it is almost exclusively airfare purchases. It's difficult for e-retailers to overcome the importance of habit and relationships in Spanish buying patterns.

The economic crisis has turned the tide. The Spanish statistics office reports a decrease of 3% per year since 2008 in the number of registered small businesses (or PYMES). In particular, sole-proprietor businesses have reverted to 2001 levels - wiping out a decade of Euro-fueled growth. Talleres are not tracked specifically but we can at least assume that the sole-proprietor trend is not simply a reflection of the faltering construction sector, since those companies are unlikely to be sole-proprietor.

Similarly, sales volume is shifting towards large chains. The statistics of sales growth (2010, YOY) by store size are perhaps most telling:
- Single store retailers: -0.9%
- Small chains: -2.1%
- Large chains: 2.3%
- Department stores: -0.1%.

What can we expect looking ahead? More of the same. Shrinking disposable income and poor credit conditions favor the behemoths, particularly value players like Decathlon (see case study below) over premium sellers like El Corte Ingles.

Meanwhile, Amazon Spain's recent launch implies an all-out assault on one of the last remaining Taller powerhouses, the corner bookstore. It's a sink or swim situation. Surely there will be stores that transform into online vendors leveraging the Amazon platform, but it's hard to imagine older, less savvy owners following this path.