A Slight Delay

Emails have circulated over the past couple of years warning that certain retailers were going out of business, resulting in gift cards purchased at these stores having roughly the same worth as a pile of stale pizza crusts. Retailers, of course, have then tripped over one another and themselves denying everything. In many cases, the retailers were perfectly healthy, or at least weren’t in trouble that bad. In today’s economy, however, all bets are off. There’s any number of ways you can spin this, but it isn’t good news any which way you look at it.

First, and most obviously, there’s unemployment. Let’s say that a 2,000-square-foot store employs ten people, some of them full time, and a handful part-time. If you close 384 of those, as Bombay Company did, that’s 3,840 people out of work… and Bombay Company is but one example; nearly every day, the market hemorrhages stores, most of them mom-and-pop outfits that won’t make the news; that fact would be cold comfort to those who’ve lost their jobs.

Then there’s the problem of filling those empty spaces. As an analysis by the Gerson-Lehman Group notes, it didn’t used to be much of a challenge filling a small- or medium-sized (up to ten thousand square foot) space, but even that’s become difficult in the current economic climate. When you factor in a bone-dry credit market, and consumers who aren’t buying, even fools aren’t lately rushing in where angels, or Starbucks, fear to tread. At the higher end–big box stores, which either anchor a mall/plaza, or that stand alone–the problem grows exponentially bigger. It means more job losses, lost tax dollars, lost revenue, and a piece of real estate that’s likely to stay empty for much longer than usual. If a Barnes and Noble closes, it’s not as though they have much competition waiting for that space; other businesses will likely have competitors in close proximity. Contraction among most big-box stores (with a few notable exceptions) means that vacancies are likely to stay that way.

I should add here that the real estate bubble had the same effect in a number of smaller towns and cities in my area that the crash is now having on the remainder. High prices will scare off new businesses, whether an established chain (they didn’t get that way by being foolish with their money… usually) or a business that’s altogether new but lacks sufficient startup capital to last beyond a few months.

The impact, however, isn’t limited just to malls and plazas. We also have to take into account the “malling” of the downtown areas of smaller cities and suburban areas. In these circumstances, you don’t necessarily have to be a Big Box to be an anchor; many times, the right combination of small- and medium-volume stores can fill the same function, attracting shoppers to downtown areas in much the same way that an anchor store would at a mall or plaza. In either case, the loss of an anchor, regardless of size, tends to negatively impact the other, smaller/indie stores that would otherwise not necessarily draw the same traffic on their own. The problem is only compounded by the fact that your average downtown (as opposed to one like New York, where the environment itself is a sufficient draw to lure people in regardless of what merchants dot the urban landscape) isn’t “attractive” enough on its own to pull in enough people to keep the lights on.

Finally, there’s an analogue to be drawn to something altogether different from retail: law enforcement. Retail, like law enforcement, has its own version of “broken windows policing.” When stores start to close their doors–as was earlier the case with factories–and nothing comes in to take the place of what’s left, you end up with downtowns that are ghost towns. It’s not all that hard to imagine northern New Jersey, and other areas whose economies depend on a retail environment that’s past the saturation point, becoming a retail version of the Rust Belt. A certain critical mass needs to be maintained of filled buildings, because if you lose enough tenants–whether they’re clothiers, coffee bars, head shops, or antique dealers–others tend to be scared off; after all, who wants to be one of three shops open in a one-block area?

We don’t need as many stores as we have; we neither invent nor manufacture nor innovate, it seems, at the same pace we used to. That said, our economy has rapidly become so dependent on what’s euphemistically termed the “service industry”–mostly the sales and service of someone else’s product–that some means needs to be found, and quickly, of plugging the gap that’s being left by the vanishing of that economy’s foundation.

 The following are retailers closing the doors on some, or all, of their stores; figures are included where I could find them, either for the number of stores closing or for the number in relation to the chain as a whole. I’ve also taken note of those that have filed for Chapter 11. Sources follow the list.

84 Lumber (80)
Ann Taylor (117)
B. Moss Clothing Co (All)
Barbeques Galore (Ch. 11)
Big Dogs (All by end of 2009)
Bombay (all 384 stores)
Brown Shoe (30/1,100)
Bruno’s Supermarkets (Ch. 11)
Cache (20)
Charming Shoppes/Fashion Bug (250)
Chico’s FAS (25 stores projected, 2009)
Circuit City (All)
CompUSA (all stores)
Cost Plus (26)
Dell (140)
Dillards (26)
Disney (98)
Eddie Bauer (29)
Ethan Allen (12)
Friedmans (120)
Footlocker (140)
Fortunoff (All)
GAP (85)
Harold’s (All)
Home Depot and subsidiaries (48)
iFloor (Ch. 11, 35)
Illuminations (28/28)
JC Penney (scaling back)
KB Toys (All)
La-Z-Boy (15-20)
Lane Bryant (40)
Linens N’ Things (All)
Loews (scaling back)
Macy’s (11)
Mervyn’s (All)
Movie Gallery (378)
Office Depot (112/1,285)
Pacific Sunwear / PacSun (154 Demo stores)
Pep Boys (31)
Phillips-Van Heusen (175)
Pier 1 Imports (125 stores, 1 DC)
Rite Aid (181 stores)
S&K Famous Brands (Ch. 11; 79/215)
Sears (14 closed, 8 to follow)
Sergio Rossi (all standalone US stores)
Shane Company (Ch. 11)
Sharper Image (184)
Shoe Pavilion (All)
Sigrid Olsen (54)
Snyder’s Drug Stores (19/47)
Sprint/Nextel (125)
Starbucks (200 in addition to approximately 600 that have already closed in the US)
Steve & Barry’s (all 173 stores)
Talbots (20)
Tweeter (All)
Value City Stores (Ch. 11, 75)
Virgin Megastores (All US locations, by end of 2009)
Williams-Sonoma (undergoing restructuring)
Wilson Leather (160)
Zales (105)

Sources:
Ian Ritter/Counter Culture
Now Public
And, from Retail Info Systems News: Here, here, here and here.

Tags: Business, recession, retail, store closings

This entry was posted on Tuesday, March 10th, 2009 at 11:47 am and is filed under Crossing Madison Avenue. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.