Is brick-and-mortar retail in a death spiral?

November 26, 2013, 6:00 PM UTC

FORTUNE — Way back in 2012, there was an active — and vocal — debate over whether or not it was appropriate to open retail stores on Thanksgiving. This year, it’s a moot point: Target (TGT), Wal-Mart (WMT), Best Buy (BBY), and Macy’s (M), among others, will throw open their doors on Thanksgiving Day itself, rendering Black Friday (not to mention Cyber Monday) an afterthought.

The reasons why have nothing to do with ethics or even pent-up demand. They’re about desperation, as brick and mortar retailers fighting for share continue what retail expert Robin Lewis of the Robin Report calls “the race to the bottom” with massive, seemingly permanent discounting. “The spiral kind of perpetuates itself,” says Lewis, “because everybody is using discounting as a strategic weapon of choice. It used to be tactical to get rid of excess merchandise. Now it’s an everyday thing.”

J.C. Penney, (JCP) the wounded animal, is just one example of the many stores trying to steal share from one another; all the while, Amazon and other online retailers continue to steadily increase their piece of the overall retail pie.

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We all know the macro reasons for sluggish shopping stats at the low and middle end of the market — the shutdown, the lack of consumer confidence, increasing income inequality. But there’s another issue that has little to do macroeconomics, but may be the most significant of all; brick-and-mortar retail has given consumers few compelling reasons to go there for years, since, perhaps, the opening of the Apple (AAPL) retail stores back in 2001. “The issue is bigger than ‘ho hum, another holiday season, here we go,’” says Lewis. “It really is absurd.”

There are exceptions, of course, and Barbara Kahn, head of Wharton’s Baker Retailing Center, points out a few: Drugstore chain Duane Reade, part of Walgreen Co (WAG), has rolled out food, on-site medical consultations, and other offerings that consumers must enter a physical store to tap. But for the most part retail is suffering from both a deficit of original thinking and a surfeit of physical store locations; Lewis says there is an average of 20 square feet of retail stores for every person in the U.S., vs. three for the U.K., and that it’s often cheaper to keep an underperforming store running than to close it.

The results of the discount-as-strategy approach are exactly what you’d expect; Thanksgiving week shopping is expected to rise — at the expense of long-term sales and profits. Just take a look at recent trends for same-store sales in retail: Target’s growth in same-store sales is declining, up 3% in 2011 and just 2.7% in 2012; third-quarter 2013 numbers were essentially flat, up less than a percentage point. Wal-Mart’s first three quarters have showed an average decline in comps of 0.4%. More broadly, an average of national sales predictions for 2013 suggests a slower overall year than either 2012 or 2011. And even with the discounts, overall foot traffic continues to fall. According to ShopperTrak, retail foot traffic dropped 9.6% in 2011 over the previous year, 27.7% in 2012, and 6.9% again so far this year.

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At smaller private retailers, the numbers are worse. Sales growth at these companies is less than 1%, and mom-and-pop stores with sales below $5 million annually have seen sales contract by 2% so far this year, the slowest rates since 2009, according to research from Sageworks, which analyzes private companies.

It’s a war of attrition, says Lewis — which is, by definition, a war that no one wins. Kahn, on the other hand, remains hopeful that retailers will break out of this cycle of doom. “I think it’s an opportunity and people will figure it out.” Now that would be something to give thanks for.