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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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.
@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.
@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).
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.
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.
@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.
I hate sharper image. good riddance
@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.
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.
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.
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.
Wow, triple post. Sorry, folks. Apparently I don’t comprehend how the “preview” functionality works.
Well, how else do you expect those multi-million dollar professional athletes to get their “salaries”?
@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.
@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.
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.
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.