Retail Bankruptcies Threaten To Wreck Economy, Empty Your Local Mall

As the cost of food and gas begin to crowd out other expenses, and access to credit is limited by the mortgage meltdown, a “widening wave of bankruptcies in American retailing” is threatening the economy, says the NYT.

Since last fall, eight mostly midsize chains — as diverse as the furniture store Levitz and the electronics seller Sharper Image — have filed for bankruptcy protection as they staggered under mounting debt and declining sales.

But the troubles are quickly spreading to bigger national companies, like Linens ‘n Things, the bedding and furniture retailer with 500 stores in 47 states. It may file for bankruptcy as early as this week, according to people briefed on the matter.

Even retailers that can avoid bankruptcy are shutting down stores to preserve cash through what could be a long economic downturn. Over the next year, Foot Locker said it would close 140 stores, Ann Taylor will start to shutter 117, and the jeweler Zales will close 100.

The surging cost of necessities has led to a national belt-tightening among consumers. Figures released on Monday showed that spending on food and gasoline is crowding out other purchases, leaving people with less to spend on furniture, clothing and electronics. Consequently, chains specializing in those goods are proving vulnerable.

Beyond losing your favorite store, the bankruptcy tsunami has broader implications as troubled retailers leave unpaid bills in their wake:

Because retailers rely on a broad network of suppliers, their bankruptcies are rippling across the economy. The cash-short chains are leaving behind tens of millions of dollars in unpaid bills to shipping companies, furniture manufacturers, mall owners and advertising agencies. Many are unlikely to be paid in full, spreading the economic pain.

All this means that gift cards are an increasingly risky investment. Changes to the bankruptcy laws in 2005 may force retailers to pay suppliers before honoring gift cards or even paying employee salaries. Give cash!

Retailing Chains Caught in a Wave of Bankruptcies [NYT] (Thanks, Stephanie!)
(Photo:hive)

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  1. sleze69 says:

    Empty malls are depressing. The Tri-state mall, just south of the border in DE was where my father bought me Omega Supreme when I was a child. I just stopped there to get some socks on the way to a business trip and was shocked.

    Value City is the only store left. The mall is filthy and empty. Not that I would do anything to save it as I do a lot of shopping online. Still…it’s sad.

  2. SarcasticDwarf says:

    This is not really surprising. The steady trend towards consolidation is what is killing the traditional enclosed mall and causing problems in commercial real estate. This is especially true for the big box stores. When the Wallmarts, Targets, and Shopkos of the world close a store there is nobody else that wants that space. More often than not those spaces are converted to business space or demolished (in the case of freestanding structures). At the same time there are what, maybe 200 different companies with multiple retail location that would go in an enclosed mall in the first place?

    When the economy takes a dive few of these will be opening new locations and many will be closing existing ones. Expect to see a large number of empty storefronts in the near future.

  3. ivanthemute says:

    In other words, mall based stores which sell luxury goods are taking a hit in an economic down turn. Meh, it’s to be expected.

  4. dragonfire81 says:

    Going to get worse before it gets better methinks

  5. B says:

    If the Malls go out of business, where will teenagers shoplift and seniors do their morning walks?

  6. Chols says:

    @ivanthemute:
    second to that

  7. Munsoned says:

    I hate Zales. Browsed there a few times (actually, at three different stores) and found their salespeople to be very pushy. Decided to go elsewhere.

  8. Youthier says:

    My mall has been practically empty for the last 20 years. It does have both a Foot Locker and Zales and this post is making me think that it soon won’t.

  9. ARP says:

    Aren’t we all glad that we give huge tax breaks to oil companies, and big box retailers (the two sectors that will weather this storm quite nicely).

  10. thewriteguy says:

    This reminds me of why I love DeadMalls.com. Hopefully there will be a slew of new empty mall photos!

  11. econobiker says:

    Malls are so 1980s.

    http://www.deadmalls.com While not updated recently it is interesting. Actually here in the Nashville area one mall- Harding Place was plowed under for a Super Wal-Mart, one (100 Oaks) is going to be a hospital-health center, and another is getting torn down for an outdoor strip mall type deal- Bellevue Center.

  12. humphrmi says:

    Give cash!

    Or, here’s a novel idea: think about your friends & family for more than five minutes, and make them a nice gift by hand.

  13. durkzilla says:

    This has happened before and I’m sure it will happen again in the future.

    Adapt or die.

    I only go to the mall for the occasional burrito for lunch. Anything of substance is bought online.

  14. akalish says:

    The retail landscape of America is going to change drastically over the next 20 years, and the changes are fermenting as we speak. Between the economic downturn, the rise of retail consolidators (eg. Wal-Mart) and the increased prevalence of online shopping, I’m at a loss for what retail in America will come to mean. The States are known around the world for our strip malls and outlet stores; I’m curious what image we will project to foreigners in the future. Will the unused space be rezoned and allocated to schools, parks, homes, or something yet unimagined? Either one sounds pretty good to me; the decline of retail isn’t necessarily a bad thing. I’d love to see TED ([www.ted.com]) take up this subject.

  15. Beerad says:

    Wait a minute, Sharper Image is going out of business and that’s considered a bad thing?

  16. Norcross says:

    Malls near me aren’t closing any time soon. But it floors me that there are 4 different stores that sell athletic shoes. Maybe it’s a good thing that people don’t purchase a new $150 pair of shoes every 3 months.

  17. astruc says:

    I went into Lady Foot Locker to buy trail running shoes. The salesgirl had no idea what that meant.

  18. spinachdip says:

    @ivanthemute: You (and a lot of the commenters) are missing the point. It’s not so much the chains themselves – businesses fail all the time, after all. The story here is that effect of the bankrupticies and closures across the value chain.

    Now, the *really* luxury stores, as opposed to merely luxury-ish chains like Ann Taylor and Sharper Image, are going to be fine, I think, since the super rich folks won’t be as hard hit by the downturn as much. There will always be a market for obscenely rich people who want to spend lavishly. It’s the businesses that cater to the merely well off that will suffer the most.

  19. IphtashuFitz says:

    @akalish: Very good point. I still visit malls near me from time to time but mainly because I want to visit one specific shop, not to just wander around and browse. I’ve also gotten to the point where I do anywhere from 90%-100% of my Christmas shopping on-line so that I can avoid the mob scenes that still occur at the malls.

  20. theblackdog says:

    How funny that a few months ago, there was an article about how this one developer was going to turn around this dying mall up in Laurel, MD. Something tells me that’s not going to happen now, it will probably just continue to die a slow death.

  21. umbriago says:

    Restoration Hardware, Restoration Hardware, Restoration Hardware, Restoration Hardware, Restoration Hardware…

  22. acasto says:

    I suggested we our rather empty local mall to run some type of event to lure in the local punk kids, then lock them in and burn it down. I think the plan ran into zoning problems or something.

  23. acasto says:

    oops, that should be “…we should use our rather empty…”

  24. Mr. Gunn says:

    Yeah, to be fair, the Sharper Image should never have made it out of the 90s in the first place.

    More seriously, there’s a lot more to worry about globally(food riots, etc) than a couple malls shutting down.

    Malls suck, anyways

  25. tamoko says:

    @thewriteguy: One of my favorite sites… too bad the possibility of new pix might be the result of so much economic chaos…

    I don’t see my closest mega mall, the King of Prussia Court and Plaza, becoming a set for Dawn of the Dead yet. But you can see the subtle shifting of retail spaces. There are a few vacancies, but nothing traumatic. But the overall lack of shoppers is almost shocking. Even the wandering hordes of Tenniboppers and Goths have dwindled as their parents have opted not to waste gas by dropping them off to wander aimlessly; yet always circling back to the food court.

    @spinachdip: Excellent point.

  26. trujunglist says:

    My favorite malls are El Con Mall in Tucson and the Greenbriar (sp?) Mall and Shannon (not quite sure of the name) Mall in/around East Point, GA.
    El Con mall has basically been gutted for Target and Home Depot, while the rest of it remains almost completely empty. It was really trippy to walk around in there recently with everything closed, because they tried a few times to totally remake the mall into the cool place to be but failed miserably every time.
    Shannon and Greenbriar are just really really bad malls, although Greenbriar had the first Chic-Fil-A apparently.

  27. tamoko says:

    @Mr. Gunn: I agree, malls suck. I rarely go there, unless I need to buy some clothing, or go to the Apple Store. Amazon and EBay takes care of everything else.

  28. JollyJumjuck says:

    @dragonfire81: Well, you’re half right.

  29. Imaginary_Friend says:

    I blame those hideous babydoll tops.

  30. mbd says:

    Buy placing the same stores, selling the same goods, in every mall, these chains have been competing with themselves for too long. It’s no wonder that they are closing stores.

  31. speer320 says:

    um … [www.deadmalls.com] lol

  32. Mr_D says:

    Randhurst Mall in Mount Prospect, IL has been on life support for the past couple of years anyway. The stores there are mainly privately owned, so they won’t feel much of the chain store burn. Probably too busy feeling the burn of not having much business.

    Last I heard, it was going to be bulldozed and townhouses put in. It’s a shame, because it’s one of the first malls in the area, and is interesting architecturally. But who would buy a cheaply made condo for $2-400,000 in this market anyway?

  33. alilz says:

    One thing that no one has mentioned is the loss of jobs this means. It’s not just college students working at mall jobs (and granted I havent’ worked in a mall in a decade) but the managerial positions. Not to mention the jobs the malls generate themselves (mall management, janitorial, security). One or two stores closing in a mall may not be a big deal, maybe the mall can get new stores, but when more and more companies start cutting the number of locations then it gets harder for the mall to rent spaces, the more empty stores in malls the fewer jobs there are.

    Not to mention that I’ve known lots of people who worked part time in malls to supplement their main income — not for extras and fancy stuff but to pay of school loans, put food on the table, be able to have money to save, etc.

  34. EJXD2 says:

    @acasto: Awesome idea! Kill those different from you!

  35. ekthesy says:

    Anyone ever been to the Berkshire Mall in western Massachusetts? The archetype of the “depressing mall.” The Goth kids at the Hot Topic are the sunniest in the entire building.

  36. Erwos says:

    Amazon demolished the independent and used book stores – it’s not a surprise that online retailers are having similar deleterious effects on B&M stores. This isn’t a bad thing per se – online stores are much more efficient, and promote more intelligent purchases and lower prices.

  37. spinachdip says:

    @alilz: Don’t forget the loss of jobs in the support industries, like shipping and manufacturing and wholesalers. And combine *that* with the looming inflation and continued liquidity crunch, it’s hard not to have a shitty outlook on the foreseeable future.

  38. failurate says:

    @humphrmi: Give Cash!!!

  39. KyleOrton says:

    @Norcross: Does anyone remember Chris Rock’s bit about the mall white people go to and the mall white people USED to go to?

    I’m thinking giant buildings with only athletic shoes, baby clothes and those awful Waldenbooks.

  40. failurate says:

    I am getting married very soon. I feel sort of bad for the people who bought or will be buying us gift certificats at failed or failing stores. They might not get the secondary happiness of me enjoying new stuff.

  41. vastrightwing says:

    I never understood how retailers ever made a profit after paying their mall rent. And then you have anchor stores like Best Buy and Sears doing everything they can to prevent people from purchasing there. Bye bye Sears. Wish I could say it was nice shopping there.

  42. spinachdip says:

    @durkzilla: But this hasn’t happened before, at least not to this extent, because we’ve never had a credit crisis of this magnitude or breadth.
    we’re not talking about businesses that are particularly poor performers here.

    Without the credit crisis, these businesses could weather a tough retail climate, but as the NYT article points out, the loans that are essential for day-to-day operations have dried up. Telling businesses to “adapt or die” is tatamount to telling a high school dropout to “publish or perish”.

  43. GothGirl says:

    Newer successful malls run to categories, the mega outlet malls with the roller coasters and such… or a smallish mall with very little for the under 18 set. Most malls built in the 70-80′s were designed to bring in kids, hoping parents would come along (or give em money). Now since kids have guns…or shoplift, newer malls are being designed to keep kids out. A lot of upscale clothing stores, not so much with the toy stores and hot topics. Smaller, up scale malls are doing well… it’s all those old mid sized malls that will die off when so many of the smaller retailers start to go away.

  44. forgottenpassword says:

    malls have been dying for years & years. WAY before the current downturn in the economy.

  45. Lakanar says:

    Even Montgomery Mall in Bethesda MD, which is very sucessfull, is hurting it seems. I’ve noticed more empty or dying stores now than in years past. Discestinoary spending on designer clothing only goes so far.

  46. thewriteguy says:

    “The Goth kids at the Hot Topic are the sunniest in the entire building. “

    That’s brilliant! :D

  47. Imaginary_Friend says:

    Wouldn’t it be ironic if we see a resurgence of the local retailers that the malls have chased out? It will all come full circle then.

    The malls and strip malls in my town killed several really good used record/cd stores, three family owned book stores, a couple of toy stores, two family owned music stores, at least a half dozen furniture stores, and several small clothing and computer shops.

    Who knows if these types of retailers will ever make a comeback. It’s going to be hard weaning people away from the easy lure of Amazon.

  48. thewriteguy says:

    I think within the next 10 years, most major purchases will be done online. If I had money to invest, I would look into stock in online stores (like Amazon), shipping companies (like UPS, FedEx and Airborne Express) and look for private PO box chains that are listed on the stock exchange.

    On the last point above, I predict that more PO box stores will open across the country, be larger in store size, be open after traditional 9-to-5 work hours, and feature several over-sized lock boxes… You buy a large item online, pick it up a week later at your nearby PO box store, where it’s been stored in one of the large lock boxes.

    We’ll buy most of our non-necessity, luxury items online (and perhaps most clothes, as well).

  49. taka2k7 says:

    meh.

    The economy is going in the tank. All that credit is finally coming due. Probably a good thing in the long run, but a couple of painful years.

  50. Sucko-T says:

    My bold and somewhat idiotic prediction:

    1. Malls will close
    2. Giants like Wal-Mart will buy them and convert them into a store with living quarters for their employees. 3.Employees will live at work, will use company doctors and will make minimum wage.
    4. Wal-Mart will be able to say “we provide a living wage” because they provide living quarters but they will be paying for property instead of wages…

    /ridiculous, I know

  51. KarmaChameleon says:

    Here in Tempe, AZ, they just opened a new outdoor mall called the Marketplace that seems to be doing fairly well. It’s this bizarre mix of big box stores like BB, Target and Michaels, and then the actual “mall” portion with Charlotte Russo, Hot Topic, and the like. It seems to be trying to appeal to the local hipster douche demographic/ASU frat boy instead of just families and teens (they’ve got a “no brats after hours” curfew too, which helps). From what I’ve seen, it works. Place is packed on the weekends.

  52. Orv says:

    @akalish: Heh, you wish. Empty strip malls invariably get filled with pawn shops and check cashing places.

    @Sucko-T: That scenario reminds me of Idiocracy, where Costco stores have become these enormous megalopolises that some people spend their whole lives inside. ;)

  53. drjayphd says:

    @mbd: It was fun to watch an experiment in consolidation in North Haven, CT. There’s this one spot where dueling strip malls, across the street from one another, played host to a Coconuts and Strawberries (respectively) at one point. Trans World bought ‘em both, and now neither one exists. I wouldn’t call it a dead mall, though, as other businesses have been doing pretty well (they opened up another sprawling complex, anchored by Target, a couple of years ago, and they’re building yet ANOTHER strip mall near THERE).

  54. I was just in the mall today, which hardly ever happens, and I was surprised by how MANY stores there were! They’ve filled in a bunch of empty spaces. All teenybopper and goth-and-go clothing places, tho. I guess teenagers still have disposable income.

    I live right by the very first “shopping center” in the US, a collection of stores anchored by a department store that was opened way out on the north end of town with its own parking lot to provide a less-formal, easier access shopping experience than going all the way downtown in your hat and white gloves and pearls and whatnot.

    Anyway, THAT is half-empty right now, and THAT makes me sad, since it’s kinda historic and I can walk to it. Rumor mill says we might get a whole foods in the closed furniture store, tho, so I’ll keep crossing my fingers.

  55. bigmil87 says:

    My local mall is the Mall of America and there are always closed stores, places coming and going and so forth. I haven’t noticed a dramatic increase this year as far as concerned to others. At least not yet.

  56. humphrmi says:

    @Mr_D: Wow, Randhurst Mall, there’s a name I haven’t heard in a loooong time. When I was a kid, my brothers and I used to ride our bikes from our house in Des Plaines to Randhurst mall, spend the whole day hanging out, eat lunch there, and then ride our bikes back. It was a day-trip; the bike ride itself was about 45 minutes each way. Even more fun (back then anyway) was Golf Mill, with the old mill wheel. Back then there were actually stores you wanted to go see, like magic shops and coin collector shops and so forth. Not anymore though. Ahh, good memories. Now it’s all been replaced by foreign-owned, cookie-cutter malls with the same boring national chain stores that have no soul whatsoever.

  57. overbysara says:

    I hate sharper image. good riddance

  58. CPC24 says:

    @forgottenpassword: You’re right; this has been going on for a long time. Malls peaked sometime in the mid ’80s, along with video arcades and Bon Jovi.

  59. P.T.Wheatstraw says:

    Here’s an example.

    My girlfriend owned a bookstore. After three years she moved it to a more affluent and left-leaning walking neighborhood, where you would assume college-educated people with disposable incomes would be frequent customers. This turned out not to be the case.

    Oh, people would patronize the store, particularly the book clubs, Stitch & Bitch sessions, and book signings. But they would show up to these events (typically catered) with a copy of the book they bought on Amazon. They’d hang out for three hours talking about books and then actually buy the recommendations for $1 less at Barnes & Noble.

    So, the store wound up going out of business (thanks in part to a rather rapacious landlady, but that’s a whole ‘nother story). It was a shitty experience all ’round.

    The thing is, all the retail from that entire street is suffering the same fate. You lose foot traffic because there are fewer stores, and with less custom, the stores lose money and wind up closing. This adversely affects the neighborhood because one of its main attractions to people used to be that you could walk to the independent coffee shop to buy coffee, chat with your neighbors, mosey over to the grocery store to get some food, and drop into the bookstore on your way back home. If this trend continues, all you’ll be able to do is order shit online or drive to the mall…and customer service in both of these options is absolutely dreadful.

    This trend is happening because we, the consumers, chose it to happen. Read GK Chesterton on distributism. The best thing for the economy and for the health of our neighborhoods is to have a million small shops, so STOP SHOPPING AT FUCKING WAL-MART already.

  60. P.T.Wheatstraw says:

    Here’s an example. My girlfriend owned a bookstore. After three years she moved it to a more affluent and left-leaning walking neighborhood, where you would assume college-educated people with disposable incomes would be frequent customers. This turned out not to be the case.

    Oh, people would patronize the store, particularly the book clubs, Stitch & Bitch sessions, and book signings. But they would show up to these events (typically catered) with a copy of the book they bought on Amazon. They’d hang out for three hours talking about books and then actually buy the recommendations for $1 less at Barnes & Noble. So, the store wound up going out of business (thanks in part to a rather rapacious landlady, but that’s a whole ‘nother story). It was a shitty experience all ’round. The thing is, all the retail from that entire street is suffering the same fate. You lose foot traffic because there are fewer stores, and with less custom, the stores lose money and wind up closing. This adversely affects the neighborhood because one of its main attractions to people used to be that you could walk to the independent coffee shop to buy coffee, chat with your neighbors, mosey over to the grocery store to get some food, and drop into the bookstore on your way back home. If this trend continues, all you’ll be able to do is order shit online or drive to the mall…and customer service in both of these options is absolutely dreadful. This trend is happening because we, the consumers, chose it to happen. Read GK Chesterton on distributism. The best thing for the economy and for the health of our neighborhoods is to have a million small shops, so STOP SHOPPING AT FUCKING WAL-MART already.

  61. P.T.Wheatstraw says:

    Here’s an example. My girlfriend owned a bookstore. After three years she moved it to a more affluent and left-leaning walking neighborhood, where you would assume college-educated people with disposable incomes would be frequent customers. This turned out not to be the case.

    Oh, people would patronize the store, particularly the book clubs, Stitch & Bitch sessions, and book signings. But they would show up to these events (typically catered) with a copy of the book they bought on Amazon. They’d hang out for three hours talking about books and then actually buy the recommendations for $1 less at Barnes & Noble. So, the store wound up going out of business (thanks in part to a rather rapacious landlady, but that’s a whole ‘nother story). It was a shitty experience all ’round. The thing is, all the retail from that entire street is suffering the same fate. You lose foot traffic because there are fewer stores, and with less custom, the stores lose money and wind up closing. This adversely affects the neighborhood because one of its main attractions to people used to be that you could walk to the independent coffee shop to buy coffee, chat with your neighbors, mosey over to the grocery store to get some food, and drop into the bookstore on your way back home. If this trend continues, all you’ll be able to do is order shit online or drive to the mall…and customer service in both of these options is absolutely dreadful. This trend is happening because we, the consumers, chose it to happen. Read GK Chesterton on distributism. The best thing for the economy and for the health of our neighborhoods is to have a million small shops, so STOP SHOPPING AT FUCKING WAL-MART already.

  62. P.T.Wheatstraw says:

    Wow, triple post. Sorry, folks. Apparently I don’t comprehend how the “preview” functionality works.

  63. GlennA says:

    Well, how else do you expect those multi-million dollar professional athletes to get their “salaries”?

  64. barty says:

    @trujunglist: Both Greenbriar and Shannon have been on a slide for over a decade. I’m really surprised that one or both of them haven’t closed completely, particularly since new shopping plazas have been constructed within close proximity of where most of the people were coming from to shop there anyway.

    I went by the local Sharper Image and everything was STILL overpriced, despite their “going out of business” sale.

    So far as big boxes putting mom and pop businesses out of business, the ones who adapt stick around. The ones who stick to the tired old business models, keep their old odd hours like they’re the only place in town, charge ridiculous prices or try to go toe to toe with the big boxes are destined to fail (my local Ace Hardware hit everyone of these points). If they can offer something the big box can’t and not charge an arm and a leg for it (in other words, stop trying to pay the rent on one sale), people will still keep coming there and they’ll remain successful.

  65. econobiker says:

    @KarmaChameleon: Those outdoor living centers are the new retail wave. Funny thing is that the Bellevue Mall here in Nashville is going to be reconfigured (torn down except for Sears and Macy’s).Funny thing is that a large strip mall complex (Nashville West) was built on the location of a former small Wal-Mart/Winn-Dixie plus bunch of extra acres. This took stores which could have been in the mall if it wasn’t dying.

    KyleOrton at 04:16 PM on 04/15/08 Reply * @Norcross: Does anyone remember Chris Rock’s bit about the mall white people go to and the mall white people USED to go to?
    In Nashville that is called Hickory Hollow. This mall is so bad that, for example, a local gang member kingpin, now convicted of multiple federal drug charges, had used the mall parking lot as a transfer point for drug transport cars while he hung around in the mall.

  66. windycitygirl68 says:

    In the 70s, with 4 young children to clothe, my parents avoided locally-owned shops like the plague, mainly because the thought of us all having to try on clothes and shoes overwhelmed them, but also because their return policies were pretty tight and they did not accept credit cards (Dad’s BankAmericard!)So we always headed over to the big boxes of the time – Sears, JCPenney, The Treasury, K-Mart, etc. Now they have grandchildren that they would like to buy gifts for and are always bemoaning the fact that local retailers at which to buy unique clothing and toys don’t exist anymore. Internet shopping is out for my elderly parents, so they have gone to buying savings bonds for the kids. As one commenter speculated, I hope that we do come full circle and see the return of local retailers.

  67. ahwannabe says:

    I wish somebody would tell the Glendale Galleria it’s supposed to be dying. Last time I went I couldn’t even find a parking spot.