Over the past six months we've witnessed a large number of retailers falling victim to the current economic crisis; the most recent victim is Circuit City. While much of the decline in retail spending can be tied to the economic crisis, another driving force is a retail marketplace which has outpaced consumer earnings. Over the past 10 years, many consumers have been spending beyond their means. For the past 50 years, consumer savings rates have declined to almost zero. Consumers have also been racking up more and more debt, satisfying their desires for immediate gratification through goods and services by using credit cards, or pulling equity out of homes which are often already heavily leveraged.
Obviously this type of spending was not sustainable. We've known that house bubble had to burst. We just didn't anticipate it would burst with the banks and stock market.
A short list of recent closures (store numbers in brackets)
Ann Taylor (117)
Movie Gallery (378)
Sprint/Nextel (125)
Ethan Allen (12)
Dell (140)
Friedmans (120)
Pier 1 (25)
Sigrid Olsen (54)
Talbots Kids/Mens (78)
Home Depot (15)
Eddie Bauer (29)
GAP (85)
Footlocker (140)
Bombay (all 384 stores)
Disney (98)
Macy's (11)
JC Penney (scaling back)
Lowes (scaling back)
Sharper Image (184)
Wilson Leather (160)
Pep Boys (31)
Pacific Sunwear / PacSun (154 Demo stores)
Zales (105)
Cache (20)
Lane Bryant (40)
KB Toys (356)
Dillards (26)
Fashion Bug (100)
CompUSA (all stores)
Linens 'N Things (all 371 stores)
Mervyn's (all 149 stores)
Club Libby Lu (Saks owned) (all 78 stores)
Steve & Barry's (all 173 stores)
Sergio Rossi (all standalone US stores)
Office Depot (126 stores)
Rite Aid (181 stores)
So to answer the question, when will the retail bleeding stop, we must look at the number of retailers a community can support. In the recent past, retailers have expected continuous growth in consumer spending. Now, as consumers tighten their spending behavior, competition among retailers and service sector (restaurants, hair dressers, etc.) is likely to increase drammatically. The short term news is fewers retailers, lost jobs, and shuttered store fronts. In the long term, the stores who survive will be stronger, and will have a broader consumer base upon whom to draw.
Another pattern we've witnesses over the past 8 years has been an ever increasing number of communities surrounding major retail centers (Chico, Yuba City, Redding, Sacramento) who have created their own retail centers. Rather than losing retail sales to Chico, communities like Gridley, Oroville, Paradise, Orland, Willows and Corning, have been creating their own retail centers, building their retail sectors off the high levels of retail spending of local consumers. How these retail centers perform over the next 2 years will depend greatly upon how aggressive they work to retail their customer base in their communities. Over the past six months almost every community across the country has embraced a "Shop Local" strategy.
How well communities are able to retain retail spending locally will also greatly influence the health of local governments. Many municipalities have become dependant upon taxable sales income, and have not felt the full impact of declining retail spending.
About Me: A local perspective from community and business members.
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