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America’s ‘Retail Apocalypse’ Is Really Just Beginning
- hprotagonist 9y agoin general, it is difficult for me to separate a reasonable concern borne of the knowledge that a thriving economy is important from a sense that, so far, the big retail chains that are closing many locations sell junk that i both do not want and think is largely superfluous anyway. Anyone got a reasonable way to synthesize those competing thoughts?
- Diederich 9y agoI share them, but I don't think they need to be synthesized.
- SolaceQuantum 9y agoWould it help if you considered that if over 6000 stores closed, it is very likely the majority are small stored and not big chains? From what I saw in Bloomberg article it was 550/6000 are chain stores. That leaves significantly more to small shops that are trying to provide employment and selling worthwhile goods to their local communities. For example here in buffalo we have small stores for spiritual goods that also serve as community centers for such spiritual practices.
- eternalban 9y ago> stores ... that also serve as community centers ... Historically, public markets have also provided a platform for important non-commercial informal civic interactions. The review section of e.g. Amazon doesn't seem to cut it. https://en.wikipedia.org/wiki/Agora https://en.wikipedia.org/wiki/Agora https://en.wikipedia.org/wiki/Bazaar https://en.wikipedia.org/wiki/Bazaar
- munificent 9y ago> The review section of e.g. Amazon doesn't seem to cut it. True, but neither does the strip mall surrounding a Best Buy parking lot.
- eternalban 9y agoYes and no. When my family immigrated to US when I was a teenager, I was struck by the role played by the local 7/11 (!) and strip mall as the hang out place for the suburban kids. There was literaly no where else in the suburbs. So yes, not exactly an "agora" but better than nothing.
- sandworm101 9y ago>>> junk that i both do not want and think is largely superfluous anyway. I'm reminded of an article I read last year about parents buying presents for kids at Christmas. In the 90s it was easy. The kid wanted a thing. A gaming device, a dress, or a car... there was an object that the kid wanted to own. That object was sold at a store. But today's kids don't want things. They have the iPhone. What they want is 50,000 likes on facebook. Their happiness is tied less directly to things than social acceptance. Often having the thing leads to that social acceptance, but increasingly not. Your seeing the junk as superfluous, and mentioning it here on HN, fits with that shift away from retail goods and towards social acceptance via online communities.
- thefalcon 9y agoThankfully 50,000 likes on Facebook is cheaper than the object at the store. (Only somewhat kidding. Don't buy your kids Facebook Likes.)
- jacalata 9y agoMy kids, no, but that will be a hilarious birthday present for my brother.
- lotsofpulp 9y agoI think they still want things, just happen to be more "experience" related, which are more expensive. International travel, expensive restaurants, "off the beaten" path type adventures, performances etc are all in vogue, and all are good for displaying status on Snapchat and Facebook. A $50 toy isn't good for that, and the younger kids probably find more enjoyment in using phones or with video games.
- smileysteve 9y agoI think that this must be isolated in specific communities. Keep in mind that the "average American" rarely leaves their state.
- viridian 9y agoI think the synthesis is the hope that the market replacements for these stores is less terrible. The big displacer in the last few years has really been Amazon, who I think offers a better shopping experience than most overpriced specialty stores. Many of these stores only held firm in the market due to having an information advantage over the consumers, as well as the convenience of providing items that are similar in kind (ie toys at toys r us). The effects of a post online shopping and price comparison world are still being shaked out.
- javajosh 9y agoOptimistically, it means that workers will be freed up to do things that are more important. Cynically, all you (a generic programmer type) really need is food, lodging, a laptop, an internet connection, so anyone not producing or repairing those things are superfluous to you, which is actually the majority of humanity (even if you include infrastructure and supply chain). "Humanity" itself becomes a wasteful, carbon-emitting luxury you allow yourself for sentimental reasons. Or you can be sentimental for practical reasons: "Eliminating the middleman is never as simple as it sounds. ‘Bout 50% of the human race is middlemen, and they don’t take kindly to being eliminated." -Malcolm Reynolds (Firefly)
- geoka9 9y ago> so anyone not producing or repairing those things are superfluous to you But we don't program in a void, right? Somebody has to create work for us and those would be the ones doing "superfluous" things. In other words, nobody would need our programming if all they did was supporting our programming.
- ChuckMcM 9y agoIt is general market dynamics that at times stores will have things that don't sell. Whether or not "you" find them useful or not is a different story, sometimes a store will be doing well selling things you might find useless, simply because you are not the target market. The confluence of events that the article alludes to are that many retail stores went through a period of consolidation and buyout through leveraged debt. As anyone with big credit card bills understands, it sucks when you're spending a huge chunk of your income just to pay interest on your credit cards. (or in these stores cases their junk bonds). This massive debt load is forcing changes faster than what one might see organically and as a result there is a lot of turmoil in the retail business.
- bsenftner 9y agoPlus, the strategists that put these retail chains in this debt are no longer there actively working on strategy within this mess. There is more profit for them, personally, working on other deals. Net result, the "rock-stars" set up a mess, pull huge gains from the table, then leave the 2nd or 3rd team to navigate a very difficult debt load they left behind.
- petra 9y agoProgress, at least under capitalism, enables(or pushes) more and more people to do stuff that is less and less necessary, because junk is growth and growth is what's capitalism aimed at.
- wmeredith 9y agoIt's a Brave New World.
- munificent 9y agoI think the America that will result from this die-off is a better place. Less suburban sprawl. Less giant eyesore big-box stores that no one enjoys spending time in. More informed purchases because people buy stuff online where it's easier to compare reviews. But I think there will be significant, very painful collateral damage to people during this transition and I've very sympathetic to people hit by the job losses. Retail is one of the few remaining sectors in small towns. Most other work is becoming increasingly concentrated in big cities or automated away. The days of the US as a patchwork of thriving small towns is ending, but many people still live in those towns. Worse, the ones still there are often there because they are the least able to move — poverty, family commitments, etc. The US is rapidly turning into a country that has no place for the unskilled, but is also failing to provide the education needed to deal with the millions of unskilled citizens. I'm also confident that in all of this, it's not the finance industry that's going to be hurt. They'll pull another "too big to fail" maneuver and we taxpayers will bail them out, yet again transferring money to the ultra-rich.
- TallGuyShort 9y ago>> More informed purchases because people buy stuff online where it's easier to compare reviews. I was wondering about this forcing stores to provide more expertise and more flexible inventory. In my town 2 stores in a specific industry went out of business 3 years ago and made a big deal in the papers about how too many people were buying direct from manufacturers instead of visiting their store. I had been to both stores, asked some questions about products, got dumb answers and bad attitude, so I went home and bought everything online. In the last 2 years, 3 new stores in that same industry, 2 of them MASSIVE, have opened up near by (one of them in the same strip mall), and are doing very well. The difference? When you walk into these stores the employees know what they're talking about and they VERY quickly adjust inventory based on current market trends. Now I make most purchases in one of these 3 stores and not online - because I can do research better by talking to them and I can get most things immediately. It's required bigger investment from the owners, but they have thrived where previous stores failed and blamed e-commerce. Doesn't work with a lot of commodities, but if you're in retail, I think it's clear you need to specialize and add value - and that requires more investment. Don't just be there and expect to keep existing.
- AnimalMuppet 9y agoI'd say that "thriving" needs to be redefined. We think of "thriving" as being, say, 2007. It wasn't. That was an overheated, unsustainable bubble. "Thriving" means there's jobs, and growth, but it's not providing all the junk that everyone ever wants. Maybe "healthy" is a better word.
- Retric 9y agoRetail is dependent on consumer spending. As more stores close the remainder should be more profitable, which should minimize ripple effects.
- danharaj 9y agoUnless store closings have higher order effects, like making it difficult to finance the operations of the stores that don't close.
- viridian 9y agoNot to mention the network effects. If half the stores in a mall close with no new ones opening, that whole mall is going to go under, and it's going to damage all the stores in the process.
- gozur88 9y agoPlus everyone who worked at those closed stores is now out of a job.
- Noos 9y agoplus everyone who serviced those stores has just lost a market. All that HR software you sale, all the consultants, all the property owners, all the insurance people, the janitorial and other support staff...
- cobookman 9y agoAt what cost though. Boutique retail seems to be growing but at the cost of malls and large chains. You might be able to satisfy our retail needs with 1/4 the staff.
- irrational 9y agoDo you still shop in brick and mortar stores? Other than food (groceries and restaurants) and sometimes clothing, I haven't shopped in a brick and mortar store in so long that I can't even remember when was the last time. It's just so easy to buy things online, even small one off purchases. The other day I needed some AAA batteries so I just hopped on Amazon and ordered them and they showed up a day later. I probably could have used Prime Now to get them within hours if I really needed them right then. That is so much simpler than traveling to a store and back to pick up anything. I'm really not sure how most brick and mortar stores will stay in business.
- Danihan 9y agoimo this comes down to centralization and the popularity of "big box" stores. People generally don't want to go to a specialty store anymore, the toy section at Walmart is fine.
- lotsofpulp 9y agoDid they ever want to? I would bet many people prefer the toy to be delivered at home rather than going to Walmart also. Only difference is now we have that option.
- toomuchtodo 9y agoMy daughter prefers to pick her toys out in person. For everything else, Walmart Pickup is fine (order the day before, order is brought to the car when you arrive).
- gozur88 9y agoThese things go in cycles. When I was a kid if you wanted a toy you went to the toy section of a department store. The department stores spent decades contracting as specialty stores boomed. And now the specialty stores are shrinking in favor of the big box stores. It's likely the specialty stores are being crushed by online retailers. Their raison d'être was always having more inventory depth than general retail, e.g. the shoe store has a much better selection than the shoe department at Sears. But if you're after selection, you can't do better than your browser.
- ninkendo 9y agoInteresting thought. I actually hate big stores because I have to walk a huge distance to find the right section, it’s harder to find the thing I want, they’re more crowded, they’re more likely to be understaffed (30 checkout lines with 2 cashiers is very common)... It’s typically a much bigger waste of time than going to a small store. But I’m definitely a purposeful shopper: I’m always in and out with one goal in mind, I never “browse”. Maybe wal-mart and the like are more attractive to people who just kinda want to browse around and kill time?
- ewheeler 9y agoThe 'Retail jobs growth by state' chart in this article (approx 2/3 down the page) is lovely: one square line chart for each US state, positioned roughly according to geography, all equal in size. I find it very easy to grok compared to choropleth maps and similar charts that attempt to stay true to geography. Unlike other non-map presentations of US state data, this layout preserves ability to spot regional similarities visually. Is there a name for this kind of chart layout?
- gr3yh47 9y agoit looks like 'the periodic table of US retail jobs growth'
- bunderbunder 9y agoThe general idea of using lots of small visualizations broken up across some dimension like that is called "small multiples". I agree, the geographic arrangement is a really nice innovation on the idea.
- wlesieutre 9y agoAre we seeing different charts? Mine is sorted by the percent change (over 2007 to 2017), not geography. Has Rhode Island at the top left, Alaska on middle-right, etc.
- bunderbunder 9y agoIt's using a responsive layout. It shows them sorted like that if your browser's width is below a certain size, and the map-style arrangement if it's wider.
- hammock 9y agoThe chart itself is called a sparkline.[1] Neat use to organize many of them into the shape of the US [1]https://en.wikipedia.org/wiki/Sparkline https://en.wikipedia.org/wiki/Sparkline
- cbhl 9y agoI felt like this chart shows that retail store closures are a lagging indicator for employment. Stores are up in NY, WA, TX -- all states where people migrate to to work in tech companies. (Not sure about ND and UT, though.)
- mjevans 9y agoI really hate investment firms that operate entirely on financial trickery instead of actually sound business activities that increase productivity. I still think there's a problem with retail, but adding the above seems like salting the earth you're trying to grow a diverse farm in.
- cptskippy 9y agoI agree. These investment firms pickup companies for a song when their stock prices fall and then basically gut them of any value they possess. They force the companies to take on massive liabilities that make them unsustainable. Then they slap on a fresh coat of paint and sell them off to any sucker whose willing to buy them. They leave these companies circling the drain. Is this capitalism in it's final form?
- iamcasen 9y agoLate stage.
- Analemma_ 9y agoMake sure you read the article and don't just come here to comment: there's an important point that this isn't (just) due to Amazon and overbuilding, but because a lot of these troubled chains-- even the ones that are still profitable!-- are loaded up on debt from leveraged private equity buyouts. Once again, PE accomplishes nothing except stripping healthy companies to sell their organs.
- frk1206 9y agoAm curious how the profitability part is calculated. Seems like annuity payments or interest/payback on the loan is ignored? If these chains were profitable after counting in debt, there would be no debt - right?
- dboreham 9y agoYes : https://www.investopedia.com/terms/e/ebitda.asp https://www.investopedia.com/terms/e/ebitda.asp I think the GP is saying that absent the LB types extracting the money in the past, these companies would be profitable even after including interest payments because they had no business need to take on that debt. It was incurred solely as a mechanism to turn the company into a debt-machine for the benefit of the then shareholders. They took a bunch of expected future earnings, as a lump sum, at that time that turned out to not be real.
- lotsofpulp 9y agoI posit that shopping by visiting multiple stores and maybe finding what you need is a less optimal experience than choosing what you want on a screen and having it delivered. You waste less time, vehicle and fuel expenses, and you get what you want. There might be a few niches where touching or trying it on make for a better shopping experience, but for the most part, I think people would be opting for online purchasing which would put many stores in trouble even without the debt.
- AnimalMuppet 9y agoHmm, I hadn't thought of it that way. I had figured that having it delivered was less efficient. But once you factor in me having to drive to the store just for my purchase, whereas the delivery truck is going to make N deliveries, I think you're right that delivery is actually more efficient.
- devereaux 9y agoVery nice graphs to illustrate and support the points. First I like how there is no piechart, but box charts (easier to read). Then the 2nd path of job recovery in time since 2008 show a more recent divergence of retail job. Finally, it is the first time I see how GIS maps can be supplemented by stacked rectangular graphs for each state where the trend in time is shown. I spotted something going on in New England on the choropleth, but the graph nailed it. Very inspiring to read, especially for the graphs.
- mjevans 9y agoRetail jobs are already a dead end and this news doesn't make things any brighter. The structure of having space that many people go to during the day with ample parking seems sound enough... Is there some kind of job that actually needs to be done that wouldn't better be filled by automation? If not, maybe light automation (local 3D printing and final assembly) could move to such spaces.
- sytelus 9y agoRetail is the prime example of middleman business. The middleman businesses don't produce anything by themselves and attempt to extract profits via information asymmetry and/or some value adds such as geographically closer availability. Eventually both of these should be done by machines. Throughout the history technology has been killing off middleman businesses such as travel agents, insurance agents, stock brokers and so on. Retail is not an exception and I would expect most middleman businesses to be extinct eventually.
- brango 9y agoThey're aggregators. There's value in going to a single shop to buy everything instead of going to 200 individual suppliers for your weekly shopping.
- sytelus 9y agoAggregation, filtering, sorting, recommendations could be best handled by machines. All businesses specializing in this using human efforts are at grave risk.
- brango 9y agoYeah but presumably as the end user you'd still want to interface with a single entity, even if behind the scenes they're then aggregating, filtering, etc. But yeah any humans employed by them doing that work are probably at risk.
- have_faith 9y ago> best handled by machines I don't think best is correct in a lot of contexts, but just good enough is enough in most cases.
- yardie 9y ago> Aggregation, filtering, sorting, recommendations could be best handled by machines. That only changes who those middlemen are and their scope. Based on what I'm currently seeing on search machines can only deliver exactly what I'm asking for. Rarely do they recommendations that aren't patterns. For example, I was looking for backup software a few months ago, I get tons of ad pages on backup software now. I purchased that software months ago and no longer need backup software. It's probably going to be many more months before my search history cycles out of ad networks. Another example. A road was recently converted to pedestrian only in my neighborhood. Would you like to know the number of Lyft/Uber drivers that follow Google Maps end up at a dead end and have to double back? And that is coming from the world's most powerful search engine.
- PatientTrades 9y agoEven with high consumer confidence, retail is dying. The middle class no longer has the same spending habits as it did for the past 60 years. Its fair to say that retail malls and outlets as we know them might not exist in the next 15-20 years. Why would somebody walk into a Macys and buy and item when you can order it of Amazon and have it delivered the same day for %20 cheaper?
- kakarot 9y ago> Of 1,200 shopping malls across the US, 50% are expected to close by 2023. From the Wikipedia entry mentioned at the top of the article.
- gozur88 9y agoThere are still some things you might want to buy in person. Fresh produce, for example, or clothing. Especially clothing. A lot of people like to try on clothes before they buy - they want to see how it looks on them, they want to check out the quality and weight of the fabric. Plus, if you're picky about color there's no substitute for looking at something in person. I realize you can effectively do that online by buying a bunch of stuff and returning what you don't want. But that's more of a hassle than just going to a brick and mortar retailer.
- paulpauper 9y agobut once people know their size and brand they don't need to keep trying it on
- gozur88 9y agoSure, if they buy the same brand. But styles change. Not everyone is like me, still wearing the same brand (though sadly, not the same size) of jeans I wore in high school.
- s73ver_ 9y agoI don't know about you, but I don't only ever buy one brand/style of pants. Hell, even if I wanted to, often by the time I need more pants, things have changed. Either the brand/style combo is no longer available, or I've gotten fatter (or skinnier! It has been happening recently!).
- Feniks 9y agoFuck retail. For decades they have been fleecing customers. Now I'm no longer forced by stores to buy what they happen to have in their inventory. Want that obscure JPN VN? Done, delivered next day. I do feel bad about people losing their jobs. But the discounters and upmarket stores will always survive.
- wil421 9y agoHow are online retailers any different? They are “fleecing” customers just as much. In fact, Jeff Bezos is currently the worlds richest man.
- chronice70 9y ago> How are online retailers any different? I get my esoteric shit tomorrow. That's how they're different. Sorry, but not everyone is entitled to a job in 2018.
- deadmetheny 9y ago>That's how they're different. Sorry, but not everyone is entitled to a job in 2018. There but for the grace of God go I. I hope karma deals with you accordingly, should you ever find yourself in dire straits.
- s73ver_ 9y agoSo you'll not be sad if we just take your job, and remove your ability to provide for yourself.
- kaybe 9y agoI wish the city had an online inventory. Often I want to buy something specific and I am willing to go to the city for that. However, I don't know which of the hundreds of stores carry that item and which ones are available. Sometimes I give my best guess a call, but it's a stretch. I wish there was an interface so I could search what they're offering. (For example: Who sells empty glass bottles, a braided belt, fridge magnets, facepaint? There are probably about 10 stores that have it, but which ones? I can easily walk one or two kilometers just checking them out. FYI, this is a European town.)
- deleted 9y ago[deleted]
- crisdux 9y agoI'd imagine this is also partly due to the America's demographic changes and the aging population. The large baby boomer generation is retiring and entering a period in their lives where their consumption is lower. Generation X is smaller and can't keep up the consumption. Generation Y is slowly entering a consumption phase.
- mac01021 9y agoWhy is consumption lower after you retire? You've finally got time to spend all that money that you've been spending all your time earning.
- IcePenguino 9y agoIt may be anecdotal, but the local retail malls have put up their holiday decorations earlier than ever before. Every pole wrapped and bows everywhere. Feels like they're trying to fight the good fight.
- wmeredith 9y agoThis is going to be brutal over the coming decade. "The most recent government statistics show that salespeople and cashiers in the industry total 8 million." Contrast that with 70k coal workers. Imagine the devastation in the coal belt spreading to suburbs all over mid America.
- drak0n1c 9y agoFair point, but the comparison is a bit uneven - you are comparing one industry's post-devastation numbers with another's pre-devastation numbers. Across the rust belt, just a few decades ago, there were many times more coal workers than 70k. If you go back to 1923 there were 883k.
- em500 9y agoFor some additional context, that's about 5% of the total US labor force (160 million). The current labor force turnover (hirings and firings/quits) is around 5 million per month.
- arbitrage 9y agoThere's a lot more wrong with the coal belt than just unemployment. Systemic neglect for generations is likely more significant.
- Phlow 9y agoI'm not saying this article is wrong. I do find it interesting that it is posted just before most retailers post their quarterly earnings reports, while the sector is already severely battered with huge short volume.
- pascalxus 9y agoMalls hold no interest for me whatsoever. There's nothing there worthwhile, other than employment. Malls have nothing: no libraries, no Good Cafes, no places to hang out, no parks, no museums, no zoos, limited live music, no outdoors. And the few things it does have: like some book stores and places to eat, are all engineered to get you in and out and back to the Mall's singular focus: Spend, spend, spend: shop till you drop mentality. However, I do feel bad for the people that will lose their jobs over it. Let's make towns have downtowns, with beautiful brick roads, scenic ponds with some ducks, perhaps a waterfall, some nice cafes, a lawn with benches, some parks, some nature, trees, live music, a library and museums. It's okay to have some retails stores sprinkled around here and there, as long as they're original, and not those mass market plastic selling behemoaths we see everywhere.
- muninn_ 9y agoAgreed. Mall's attempted to remake the idea of a "city center" but because they were largely single use - shopping - and you had to make a special trip to go there versus it being on your way somewhere or within walking distance, they ultimately are going to fail. Some malls are attempting to evolve, to their credit. Ultimately it's a failing of zoning. You have houses here. business here. shopping here. library (if funded but probably not) over there. But these things should all be intermingled with the exception of manufacturing.
- deleted 9y ago[deleted]
- fhood 9y agoI agree with you 95%. But 5% of me recognizes that certain items require a test run before purchase. In my case those would be Audio equipment, instruments and tennis rackets. None of those can be confidently purchased solely on the impressions of others.
- emodendroket 9y agoYou know, people said that about furniture and clothes and now people buy them online without a second thought.
- free_everybody 9y agoI've worked at Kohls and JC Penney, and anyone with half a brain who has worked in an entrenched retail chain has seen this writing on the wall for many years. Clothing from these stores are generally out of touch with modern trends. They can't keep up.
- readhn 9y agothis is all coming together nicely with this amazing market bull run from 2009 coming to an end some time in the near future. timing the event is hard if not impossible.
- paulpauper 9y agonot really. All that is happening is that online retail is subsuming offline retail, while total retail sales keep growing. The bull market has further to go . long Amazon
- readhn 9y agomarker is running out of steam. in a year or two we might be looking at this as a very significant market top.
- samsolomon 9y agoI live near Lenox Mall and Phipps Plaza in Atlanta, and they could not be any busier. It's packed at 2pm on a Tuesday when I'm going to an eye doctor appointment. On the weekends there are often traffic issues in from people entering and leaving. I feel like it's not that malls or retailers are dying, but instead all the revenue is going to a few places with wealthy, urban locations. Perhaps this has to do with the influx of people moving from the suburbs into cities?
- mattnewton 9y agoI think that’s part of it, there is also the issue the article goes into about leveraged buyouts leaving several retail stores with interest payments that are just too high on otherwise healthy buisinesses. It isn’t enough for them to be packed, they have to show growth to beat the interest.
- jamesmp98 9y agoI miss ATL malls
- StevePerkins 9y ago#1: Buckhead is an affluent residential neighborhood, that turned into a startup hub and investment banker district in a couple of decades... but hasn't changed the "residential neighborhood" infrastructure. There are 24/7 traffic issues even when Lenox is closed. #2: The Atlanta metro had about two-dozen thriving malls a couple of decades ago. Today there's, what? Lenox/Phipps, Perimeter, maybe Cumberland (?). Mall of Georgia way out in the boondocks, having killed all the others along the I-85 corridor? Even Lenox isn't as hopping today as it was in the "old Buckhead" (i.e. pre-Ray Lewis) days. The trend is pretty stark.
- smileysteve 9y agoNorth Dekalb mall is a great example of an almost dead mall. It has a movie theater that I visited for a Tmobile Tuesday.
- southphillyman 9y ago
- bashcoder 9y agoThe author misses one key point: it’s not only about debt coming due on their scheduled dates. It’s that much of this debt is also saddled with covenants that can cause a debt to be collectible at any time if the terms are not met. Things like a company's loan-to-value ratio, leveraged inventory through high accounts payable, and other financial metrics. In short, market troubles can force long-term lines of credit to abruptly come due.
- brudgers 9y agoWalmart and Target are mentioned in the article and described as having more space than they need. Much of this is driven by improvements to logistical infrastructure over the past three decades and an increased understanding of what to do with customer/supplier/inventory data and improved capability when it comes to doing it. The recession provided them with the opportunity to remerchandise their stores from depicting abundance to depicting scarcity...it was always the case that Walmart might not have a particular item in stock, now the shelf is sparse rather than filled with one of ten other similar items that are older. But in the US retail has been overbuilt for decades because the tax incentive of passive loss fueled construction until the Tax Reform Act of 1986. It helped precipitate the S&L crisis. Low interest rates helped overbuilding recover by making real-estate development more attractive and creating higher relative returns from real-estate investment. The politics of lower taxes over the past forty years has made local governments more dependent on sales tax for funding. Because sales tax increases tend to be more politically palatable due to their regressive nature, local governments tend to be very much in love with retail. The love manifests itself as ready approval of new retail development and an even greater aversion to downzoning existing obsolescent retail parcels and broadzoning existing retail zoning districts.
- butterfi 9y agoThere's lots of talk here about the changing shopping habits of Americans, but I think we're glossing over the debt issues. These companies seem to be burdened with too much debt, which is reflective of how big business manages itself. I think this has more to do with poor management then changing shopping habits. People's habits change all the time and it seems management was asleep at the wheel.
- 40acres 9y agoThe common thread I'm sensing is that private equity and leveraged buyouts are pouring fuel on the retail fire, after reading about the Toys R Us deal it astonished me how they got raked over the coals by a PE firm.
- euroclydon 9y agoPlease remind me, if I'm ever a loan officer at a bank, to not issue a huge loan to a traditional retailer that was just taken over in a leveraged buyout -- jeez!
- leebri 9y agoWell, you can't beat dollar store prices for quality items directly shipped from China. Amazon has some real competition on their hands.
- mschuster91 9y ago> The root cause is that many of these long-standing chains are overloaded with debt—often from leveraged buyouts led by private equity firms. There are billions in borrowings on the balance sheets of troubled retailers, and sustaining that load is only going to become harder—even for healthy chains. Oooh, I am so happy if this really happens. The entire financial industry that makes "profits" from loading purchased companies up with debt and then leaving them to die needs to burn in a fire. The strategy certainly works in the short term (and nets impressive "profits" for the owners/shareholders of such holdings), but in the long term... let's just hope no one will ever be able to pull through this kind of "deal" again.
- retailbuyout 9y agoIf you think these retailers aren’t “too big too fail” you’re underestimating the lobbying and propaganda power of the people holding the debt. Hell, this article could be an example. A little too tinfoil hat for me, though.
- lurker456 9y agoThe ones who organize these deals have already taken the money and are long gone. The ones holding the bag after it collapses are the employees, suppliers and institutional investors.
- mschuster91 9y agoOf course - what happened, happened. But when banks recognize that it is not in their interest to give loans to holdings to purchase companies in order to get loans on them simply because eventually when the loans on the companies default the banks are on the hook again, they will not loan them money any more. That's the inherent beauty of interconnected and sold loans - no one will be left spared when they eventually default.
- pixl97 9y ago> the banks are on the hook again hehe > the banks are on the hook again hahaha > the banks are on the hook again Too big to fail buddy. The banks are never on the hook.
- kevin_thibedeau 9y agoRetail stores don't sell what I want. Their inventory has become too limited. After the dot com bust/mini recession, most department stores stopped stocking clothes in my size so I buy much of it online. I frequently try to hold out and find some electronic item or replacement part in local stores. I almost always fail and resort to Amazon. I'm currently looking for a cheap Bissel vacuum that is available on Amazon. I have yet to see a retailer anywhere carrying that model. Expensive, overpriced vacuums are all you can get retail these days.
- Spooky23 9y agoIt’s funny that I work next to a mall and don’t mind shopping in it. Actually I would prefer it. Problem is, I’m a gorilla... not skinny enough to be “tall” and not fat enough to be “big”, and there is not one store out of 250 that sell size 14 shoes, or a shirt with a size 19 neck that doesn’t look like a parachute, or a 52 long jacket. I see it in other areas. If you walk through Lord and Taylor or Macy’s, there’s a whole floor of petite women’s clothing. I look on the mall and see lots of bigger, taller or bustier women, all of whom are wearing clothes — but not from Macy’s! When you focus on the average consumer exclusively, you miss a lot of people!
- cr0sh 9y agoHave you tried going to an independent vacuum cleaner sales/repair place and asking them to order it for you, and pay them the markup for the time and effort? Sure, it wouldn't be cheaper than Amazon, but if you want to support local business, it is an option (if you have such a place in your area).
- Ologn 9y agoFor years the Roosevelt Field mall outside of New York City had a rather crummy food court. The food was mostly junk fast food, the tables were scarce and tightly packed together. In more recent times, they redid the food court. It is bigger, with a lot more room to sit comfortably and relax a while. They have some more upscale dining choices, organic food, vegetarian food. It makes it more likely that I would stop and eat there. I would think the competition from online made them do this. They are in a good location and didn't have to worry much about bringing in customers before.
- En_gr_Student 9y agoSo much for "service economy".
- m3kw9 9y agoIs all about making the experience better to compete with online shopping. Retail can check out how movie theatres differentiate themselves from the living room.
- javajosh 9y agoOne strong headwind to this trend is fraud. Seller fraud is well-known, and payment systems have bent over backward to insure this, but buyer fraud is even more popular these days. It's easy to cheat a seller: I'd like to see more intimate online shopping experiences involving at least a short (30s) video call between buyer and seller, at least for first-time customers. It would be particularly potent to make pleasant greetings, express joy at the opportunity to shop/serve, show the credit card on the video monitor, a photo-id, plus incidentals that give a sense for who you are. That way fraud only happens with full-blown identity theft, and now you have a good image of the thief to help the victim get relief, and you can even add the thief to a buyer blacklist. (Interestingly the video evidence format helps avoid the case where a seller blacklists people they "just don't like".)
- andrewla 9y agoArticles like this are starting to ring little bells for me. There's an argument that the government's reaction to the 1999 financial crisis (and the 1998 Russian bond crisis, which figures in) is what inflated the housing bubble [1], which started to show cracks in 2006 and 2007 (with the Bear Stearns fund collapses) and then went full-bore once things started unwinding in 2008 as home prices started to fall, and the hugely leveraged positions started to unwind. Since the Fed stopped the liquidation of bad assets and refused to allow pricing to adjust, the question is what new bubble we funneled capital into. There's a lot of evidence that banks have been reluctant to make loans to consumers, both because of real risks around modeling of real estate pricing, and also because of changes in the regulatory regime. It seems like it's possible that we're starting to see where all the credit has been going -- rampant investment into retail. The article mostly ignores restaurants and grocery stores (explicitly so) but we've seen other articles [2] talking about those sectors starting to show weakness as well. [1] Not a source that I'd usually cite, but here's Krugman in 2005: http://www.nytimes.com/2005/08/29/opinion/greenspan-and-the-bubble.html http://www.nytimes.com/2005/08/29/opinion/greenspan-and-the-... [2] https://news.ycombinator.com/item?id=15593880 https://news.ycombinator.com/item?id=15593880
- coldtea 9y ago>In the U.S., retailers announced more than 3,000 store openings in the first three quarters of this year. That sounds like an insignificant number -- you can get as many openings, if not way more, in a country with 10-50 million population (but less centralized retail sector, with fewer cross-country chains).
- zappo2938 9y agoDid it show how rural areas compared to urban areas? I only looked at the visual map quickly and it looks like rural areas are going to hurt the most. If so this will have great political consequence.
- headcanon 9y agoThe free market in action. Retail outlets are simply not equipped to handle the tastes of the modern consumer. It is an industry that saw huge growth in the 80's and 90's and has not been able to keep up with technology. As the segment of the population that still exclusively shops brick-and-mortar ages, unless these businesses can evolve and modernize they will continue to fail. Tough break, but its ultimately better for the consumer. Retail jobs are some of the worst ones to have too, so as long as the gross job counts are replaced then good riddance. There are real problems that brick-and-mortar solve though, mainly having instant tactile demos of products, like holding an iPhone at the Apple store or trying on clothes. Future businesses will figure out how to combine the two approaches into a profitable business model. Trunk club is a good, if expensive, example.
- duderific 9y ago> Retail jobs are some of the worst ones to have too True, but they are also some of the only jobs nowadays that are available to people without college degrees, or people who have effectively aged out of the white collar or blue collar workforce, but still need to generate some sort of income. Notice how many retail clerks nowadays are in the 55+ set.
- headcanon 9y agoI know, thats why I qualified it with "so as long as the gross job counts are replaced" Being a millenial, most people I've met in my age group are working in either retail or food service. Many of them also have 4-year degrees, just not in a business or technical field. One could say they should have made better educational decisions, but I would rather live in a world where we can celebrate the variety of human interests and endeavors, and not subject people to a lifetime of economic purgatory just because they didn't learn programming or whatever in school. I'm lucky because I happened to be legitimately interested in something that is very profitable in today's economy. Others are not so much, and I really feel for them. But the solution does not lie in dead-end jobs that give no kind of gainful employment.
- phirschybar 9y agoFull disclosure: I am the co-founder and lead developer at https://www.locally.com https://www.locally.com. We do exactly what I describe below and we're seeing great results. People want to buy from their local stores. They just need the modern paths to purchase: BOPIS (buy online pick up in store), local delivery, and the knowledge oh what is in stock nearby. IMHO, the real path forward for retail is to get their in-stock goods in front of online shoppers via their brands' web sites, their own web site and local marketplace sites. Ecommerce is not the solution because nobody can expect to compete with Amazon. Brands are learning the hard way that they cannot go D2C (direct to consumer), nor make a profit off selling on Amazon. They HAVE to support their network of retailers: small and large. Yes, the day of reckoning for retail is coming. But it won't be an apocalypse. 90+% of retail transactions still occur in a brick and mortar store and people love to shop. Most retailers (and brands) just don't have the data and tools (yet) to drive traffic to stores. They're still figuring out the Amazon problem. We're getting there though.
- plies 9y agoHi phirschybar, in the future please put the "FULL DISCLOSURE" part up top, rather than as an after thought. It didn't feel very good to read your comment and then only find out at the end that you have both a personal and professional stake in the matter.
- phirschybar 9y ago@plies, cool. just edited.
- _rpd 9y ago> People want to buy from their local stores. Why? I love my local baker, but for brand name items, I'm going to order online. > BOPIS (buy online pick up in store) Why is this attractive to anyone? If I am making the effort to fight traffic and parking to visit a physical location, I want to handle the item. "BOPIS" seems like the worst of all worlds to me. > knowledge of what is in stock nearby This is crucial. This is the main reason I no longer visit physical stores. They likely don't have the item I want in stock. It's just an exercise in pure frustration. I don't want to be cross-sold or up-sold, and I certainly don't need someone to order an item that will require a return visit in 2-4 weeks. > local delivery Maybe if it is same day, otherwise why do people care?
- adameast9000 9y agoIm curious as to what the response will be from regulators when these loans start to mature. I'm assuming none of these companies are 'too big to fail', and will be allowed to fall apart. That's the big difference between 2008 and now I think. Will anyone want the assets of Macy's, Kohl's, etc. once commercial retail collapses? It's going to be a real disaster I think, and unfortunately the hardest hit will be the poorest Americans once again. Big winner? Amazon...
- metalliqaz 9y agoRepublicans will help them get by long enough to become the Democrats' problem.
- adrianratnapala 9y agoNow all of a sudden, I want to go to America just to see how terrible and horrible the shopping malls are. I'm from Australia which is full of them (though we call them "shopping centres"). And they seem very pleasant to me. They are convenient for many kinds of shopping. I didn't hang out there as a teenager in the '90s, but others from my school did. Since then they have become more pleasant for socialising -- though perhaps more upmarket and less teenager friendly. They have proper restaurants as well as the old food courts. And my mother's favourite cafe is at a shopping mall -- and it is reallyp excellent.
- pixl97 9y agoIn general the malls aren't horrible. Since you are from AUS, the first thing you'd notice, is there are twice as many stores/sq ft of space per capita. https://qzprod.files.wordpress.com/2017/07/marc-squares.png?w=640 https://qzprod.files.wordpress.com/2017/07/marc-squares.png?... The big problem with this is AUS GDP is about $47k per person. US GDP is 57k. So for only $10,000 more earned per person, we have double the retail space. This can't possibly work long term. US retail is in bad shape because of terrible monetary policy.
- debacle 9y agoSome context - I live in Buffalo, one of the areas in the 10-25% range. You can't give away commercial space here in Buffalo. Prices are <$1/sq in a lot of places. A few years ago, ~60% of the commercial space in North Buffalo was vacant. Our malls are...problematic. Two have already converted into office space, with a third being slowly transitioned as it empties (I believe it is empty now). One of our malls is dying a slow and painful death, even as it is surrounded by a booming retail space. Our other mall has been designed very well to be a destination vs an in/out type of location. But there are still many commercial vacancies. I don't know a lot about zoning, but many of these locations should really be repurposed to residential. There's also a large sprawl problem. Finally, it looks like Niagara Falls was included in that statistic and Niagara Falls is an absolute shithole.
- heurist 9y agoBig box chains and suburban shopping malls were doomed to fail. They built in a boom time and built in places expecting to draw in new development and residents from tens of miles away. But they based all their site decisions on an impractical urban development model (suburbs) that turns out to not work in reality, and they lost their drawing power to online retail. Smaller form-factor retailers are doing fine because they can easily go where the demand is and provide better service without making customers feel like cattle. The big box chains are realizing this and contracting to smaller stores more conveniently located to try to keep up with the market. They still have a price advantage and people are willing to walk or drive short distances to have goods now rather than wait a couple days for their Amazon Prime package. I hope the massive amount of equity tied up in the failing subsection can be transferred elsewhere though...
- readhn 9y agoIt's a prelude to overdue broad market downturn IMO.