Why Are So Many Stores Closing?

Perhaps you’re wondering why soooo many chain store retailers are closing sooooo many stores, especially after what has been hailed as a gonzo holiday season. To be sure, after every New Year retailers have always pruned deadbeat locations. But the numbers going into the trash bin of history are dizzying. More than 9,000 store units closed last year. A higher number is predicted for 2020 (https://moneywise.com/a/chains-closing-the-most-stores-in-2020).

The names coming off marquees across the country include some venerable labels: Sears, Kmart, Macy’s, Forever 21, Pier 1 Imports, Gap, Chico’s, Bed Bath & Beyond. Why is the contraction reaching unparalleled heights? Though each chain has its own problems, there are common threads that have unraveled throughout the retail industry.

Start with the fact that in the United States we are overstored (forgive me for not providing actual statistics, but after 32 years covering the retail industry as an editor and publisher of Chain Store Age I am taking retirement privilege and just providing trend analysis. You’ll have to trust I know what I am talking about).

How did we get overstored? No retailer thinks their store is not desired by voracious consumers. So when real estate developers pitched less than A+ locations they signed on the bottom line, sometimes induced to do so as the price of landing a truly A+ spot in a different coveted shopping venue owned or operated by the same developer. The developers, of course, needed those tenants to get their construction loans. Thus, it is no wonder that stores in secondary market are closing and with them secondary market shopping centers.

Everyone wants to blame Amazon and other Internet retailers and before them Walmart, Target, Home Depot and an assortment of big box retailers. Yes, they all contributed to the blacking out of storefronts on Main Streets and in strip centers. They killed off lots of independent merchants and weaker chain stores. As for Internet retailing, it still accounts for just about 15% of all sales.

So what’s behind the tsunami of store closings? Lousy merchandising choices, for one. For apparel and fashion home goods stores, if the wrong stuff is put up for sale customers will stay away in droves. As rents and labor costs are high, the combination with the cost of goods put retailers in a swimming pool of red ink.

Many chain stores have high levels of debt because private equity firms bought them by leveraging retail assets, mostly their leases or the land they owned for their stores, warehouses and distribution centers. When sales fail to meet budget expectations debt payments cannot be met. Suppliers refrain from selling them merchandise because if a company files for Chapter XI bankruptcy protection the law allows creditors to claw back all payments made in the prior 90 days. Suppliers fear being paid pennies on the dollar for their products. That’s why the first clue of a pending bankruptcy filing is insufficient product on shelves or clothing racks.

Failure to keep abreast of state of the art technology and distribution efficiencies are more harbingers of doom. Often it’s because companies did not have the cash flow to make the necessary investments. It’s a melting snowball effect in a red hot competitive industry driven by shoppers who demand instant gratification.

Let’s not overlook the polarization of our population. Not our political divide. The economic bifurcation. The fastest growing retail formats are dollar stores and food discounters like Aldi and Lidl, both European imports, that cater to families on tight budgets. Companies that serve middle income consumers are being squeezed.

Being a high end retailer doesn’t guarantee success. Barneys New York failed because of the aforementioned heavy debt load strapped on it by private equity owners. Toys “R” Us, which knocked off almost all toy competitors, succumbed as well from its private equity debt load. Toys “R” Us was never the price leader. It based its success on being in stock on the most wanted toys. When Walmart and Target matched Toys “R” Us on inventory management the game was lost. Walmart and Target had many more stores than Toys “R” Us in most markets, making it more convenient for shoppers to find what they wanted in their stores. Location, location, location. Three keys to success. Or failure.

Can you still make it in retailing? A resounding, emphatic, YES! Required are merchandise tailored to a specific audience; systems that provide seamless customer fulfillment and support; dedicated, driven staff from the top down; sufficient capital, and even more capital; savvy marketing including an Internet presence; and those historical three keys—location, location, location.

Successful retailers make customers their unpaid promoters. Think Trader Joe’s or The Container Store. A successful retailer would be missed if it closed its doors, missed not because it was nearby or a long time presence in a community, but rather because it brought excitement and fulfillment to the often mundane task of buying and selling everyday goods and services plus the occasional frills that make shopping essential and enjoyable.

My Letter in The Times Lights the Way

It took more than two weeks, but The New York Times finally published my letter to the editor, online Sunday and in Monday’s printed edition. 

Back on April 12 two of Thomas Edison’s great-grandsons opined in The Times that “the Department of Energy now wants to roll back new efficiency standards (for light bulbs) signed into law by President George W. Bush and updated, as required, during the Obama administration” (https://nyti.ms/2VDXgtT).

The proposed withdrawal is another example of Donald Trump’s demonic compulsion to eliminate any vestige of progressive action by his predecessors, especially if it smacks of any environmental benefit to reduce the impact of climate change.  

The Edison progeny advocated public and congressional opposition to any plan by the Energy Department to narrow the scope of energy saving standards. 

It was in that context that I sent my letter to The Times. With slight editing to my original submission, The Times ran the following:

“We cannot rely on the Trump administration to do the right thing when it comes to enforcing light bulb energy standards. Instead, private enterprise must lead the way.

“Large chain stores—Walmart, Target, Kmart, Home Depot, Lowe’s, Menards, Costco and Ace Hardware, as well as Amazon—should exert their public service commitment by not buying or stocking less energy efficient incandescent light bulbs.

“Retailers can shine a positive light on the future direction of our country.”

Naturally, not everyone is on board with any plan that would deny consumers the opportunity to buy cheaper 100-watt incandescent bulbs compared to more expensive L.E.D.s. In response to a friend who brought up the issue after seeing my letter, I wrote back, 

“Yes, it will cost more and the poor would be disproportionately hurt. But just as we have required seat belts in cars at a higher cost, just as we require food safety inspections that raise the price of food, just as we have tolls on roads that make travel costlier, there are some mandates that are put in place for the common good. Call it totalitarianism. Or socialism. Or saving the planet for our grandchildren. Doing nothing is not an option for long term survival.”

Here’s how the Edisons put it: “Few actions can reduce the carbon dioxide emissions that are warming the planet as cheaply and easily as replacing energy-wasting bulbs with highly efficient ones. The group (the Natural Resources Defense Council) estimates that if every household in the United States replaced just one old bulb with an L.E.D., the country’s overall electric bill would be cut by more than $5 billion in 10 years, and two million metric tons of carbon dioxide pollution would be avoided. 

“The savings are so big because the average American household has around 40 lighting sockets, and many still employ energy-wasting bulbs. We need efficiency standards to spur more innovation and ensure that our store shelves carry new bulbs reflecting the latest technology.

“Regrettably, special interests have reared their heads once again. Big bulb manufacturers supported by the Energy Department prefer to take the cheap, inefficient and environmentally harmful path for short-term profits. They would sacrifice our common good for their selfish greed.”

This was not my first letter published in The Times. Eleven years ago, when Allianz was reported by The Times to be near to securing the naming rights to the then new Meadowlands stadium where the New York Giants and Jets would play, I revealed the link between the company and its history of insuring Nazi death camps. To its credit Allianz already had disclosed on its website its association with the Nazi regime. But The Times article merely identified Allianz as a German financial services company (no doubt that is how the company identifies itself in press releases).

After my letter was published The Times followed up with a major story entitled “Naming Rights and Historic Wrongs.” Less than a week after my letter appeared, after intense public rejection of the Allianz overture, Allianz abandoned its bid. Only then did MetLife step in to secure the naming rights (https://nosocksneededanymore.blogspot.com/2010/01/chain-of-one-person-events.html).

If Sears and Kmart Closed, Would You Care?

Perhaps if you’ve been paying attention to news unrelated to Hurricane Michael or new Supreme Court justice Brett Kavanaugh or the baseball playoffs or the 1,300 point plummet of the Dow Jones Industrial Average Wednesday/Thursday, perhaps you read or heard a story about the possibility venerable, no longer venerated, Sears and stepsister retailer Kmart may file for Chapter 11 bankruptcy protection as early as next Monday.  

Chapter 11 is not a death sentence. It is a reorganization tool meant to provide management with the time and financial freedom to resurrect a dilapidated business. Macy’s passed through Chapter 11. So did Best Buy. Plenty of other retailers, on the other hand, went from Chapter 11 into Chapter 7—liquidation. 

For more than 40 years I have been tracking the misfortunes, and occasional fortunes, of Sears and Kmart as they strived for relevance as societal and competitive realities evolved around them. (Once antagonists, Sears and Kmart became stepsisters as part of financier Eddie Lampert’s design to turn them around, or at least turn a profit for himself, by selling off their assets, including real estate and brands such as Craftsman.)

For 30 of those 40 years as editor and publisher of Chain Store Age, I met with the consecutive line of chairmen and chief executive officers of Sears and Kmart. Each sincerely believed his formula (it was always a he, never a she) contained the magic potion to resurrect a flailing business (that’s not a typo, I meant flailing). Perhaps, if Walmart and Home Depot and Amazon had not been imagined Sears and Kmart might have had a chance. But retailing is an industry that rewards innovation, particularly as it applies to efficient distribution. From better locations to quicker dissemination of products from manufacturer to store shelf to, especially in Amazon’s case, a consumer’s home, competitors outdistanced Sears and Kmart in their ability to meet consumer expectations.  

Sears was built with the mythology of the “Father Knows Best” family in mind. Even its one time diversification strategies—Allstate Insurance and the Discover card—reinforced the fulfillment of household needs. 

Kmart sought to capitalize on a growing middle class seeking cheap consumer goods in convenient self-service stores. 

But if the lady or teenage girl of the house needed something stylish to wear, Sears and Kmart were the last places they would shop. A department store or specialty store or Kohl’s fit the bill. Maybe even Target.  

If the man of the house was going to work on a home improvement project he turned to a local home center retailer, that is, before Home Depot or Lowe’s swallowed up their customers, as well. Electronics sales went to Best Buy. Toys to Toys “R” Us—the Sears Christmas Wish Book succumbed long before Toys “R” Us did. 

Kids could be dressed in Sears or Kmart clothing. Until, that is, they were old enough to voice their own apparel preferences. 

Will Sears and Kmart be salvaged or scuttled? Ask yourself these questions: When was the last time you shopped Sears or Kmart? If one or both stores disappeared, would you notice? Would you miss them?

For most of my professional life Sears and Kmart represented major portions of the copy that flowed through my editor’s desk. I walked their stores across the country. I shopped their stores. As recently as two weeks ago I bought some supplies in Kmart. 

Apart from the yawning gap closing the White Plains Sears and Kmart would have on their respective shopping centers, I cannot say I would miss them. I’d experience some personal nostalgia, but, no, I could not say I would miss them.

I'm Ready for My Close-up, CB

My brother’s son, Eric, made it onto NBC’s national newscast last Wednesday night. Alas, he was one of the victims of the data hacking of Anthem Inc.’s health insurance files. A face was needed to personalize the tens of millions affected consumers. Eric became everyman.

Still, it was a thrill to be interviewed for about 30 minutes, of which perhaps five seconds of Eric appeared on air. Such is the life of an everyman consumer. 

This wasn’t the first time Eric scored media news coverage. Back in 1998 The Washington Post featured his exploits at the Winter Olympics in Japan (as a spectator, not as an athlete). More on that later.

No matter how many times it happens, even if you are an every day bylined reporter, there’s never anything dull about seeing your name in print, or seeing and hearing yourself on air, TV or radio. I always turned to my editorial column whenever a new edition of Chain Store Age reached my desk. Don’t believe anyone who tells you they are indifferent to the experience. They’re deluding themselves and lying to you. It’s equally stimulating when others notice your work and bring it to your attention.

About 25 years ago I secured MasterCard as a sponsor for a Retail Credit Trends report my magazine published. A few months later American Airlines signed MasterCard to sponsor a business segment for its in-flight programming. MasterCard asked me to be part of the telecast. I was flattered but the thrill became palpable when a friend mentioned that while flying to California he happened to look up from his work at the very moment my face appeared on a big screen before him. He didn’t have his headphones on, but he said I looked authoritative.

Some 12 years later NPR invited me to its New York studio for a live afternoon broadcast (I think it was for All Things Considered) on the retail scene in Maryland, specifically why large chains, especially The Home Depot, were not placing stores in a predominantly Afro-American community. As people rarely recored radio broadcasts it was not unexpected when few of my family and friends listened to the 15-minute interview live or on tape. 

So it was that much more exhilarating when I learned one of Ellie’s friends in Hawaii called her to say he heard her dad being interviewed on NPR. That made me smile almost as wide as the time an advertising client related how a salesman started dancing around an office waiting room holding a copy of Chain Store Age open to my editorial page while screaming, “He was a camper of mine.” 

Seeing one’s name in print is not always an occasion to relish. Among my editorial job tasks was talking to the press, which I did about twice a month. I’m a journalist, so I can say this: Be wary when talking to a reporter. Measure all your words carefully. Think how they might sound or appear in print. They don’t mean to, but reporters may place your words out of context. Until I saw or heard the finished article I always worried the reporter might distort a comment made in context into a sensational quote I would need to explain to a bent-out-shape retail executive.

As long as I’m updating you on my media history, I saw the other day that HBO will air the mini-series Show Me a Hero beginning August 16. The producers filmed it without my debut as a film extra last fall; I could not make the first casting call and they didn’t bother to get in touch with me again. Ah, well …

Getting back to my nephew Eric, here’s how Washington Post reporter Kevin Sullivan chronicled his exploits at the Nagano Olympics in 1998: 

After portraying how the rich and famous enjoyed the Olympics, Sullivan wrote, “For those without royal blood or imperial purses, there’s always the Eric Plan. 

“Eric Forseter, 22, from Rockville, (MD), is spending a year bumming around Australia as he prepares for law school next year. He bought a cheap plane ticket from Sydney to Tokyo plus a Japanese rail pass, and made his way to Nagano with about $400 in his pocket. 

“Forseter found lodging at a hostel, where he spends about $30 a night to sleep on a tatami mat on the floor in a room with 10 strangers. He had to go out and buy a towel, and he's living on orange juice and croissants from the convenience store. He said his accommodations are relatively spacious, though, compared with the 15 or 20 George Washington University students crammed into another room. 

“On his first day in town, Forseter met another young man who had bummed two tickets to the high-profile Canada-Sweden men’s hockey game from one of the players. They sat in great seats right behind the goal, then moved to seats directly behind the team benches. They collected a couple of stray pucks and even a broken stick from the Swedish team. 

“That night they rolled into the Pink Elephant bar and had beers with NHL stars Brett Hull and Jeremy Roenick, who play for the U.S. team. The next day, Forseter bagged tickets for the Finland-Russia hockey game. Scalpers wanted more than $400, but a nice man invited Forseter to sit with him for free. Turns out the man is the father of NHL star Teemu Selanne, who plays for Finland. Forseter sat at center ice and chatted with Pat LaFontaine of the U.S. men's hockey team and the parents of NHL’ers Pavel Bure and Chris Chelios, who were sitting nearby. 

“Sunday night, with somebody’s extra ticket, Forseter saw figure skating, one of the Games’ premier events, for $4 — the cost of a shuttle bus. In total, Forseter figures he’s spent about $300 and had about $3,000 worth of fun. 

“‘I’m on a roll,’ he said.”

An Arresting Experience

I almost got arrested inside a retail store, hardly proper behavior for an editor and publisher of a retail industry magazine. This was nearly 28 winters ago when I ventured out one snowy February to purchase a Toro snow shovel from a home center chain now defunct but whose name I will not abuse again.

I say “again” because I exacted revenge for a less than optimal shopping experience. I recounted the deficiencies of the retailer and its store manager, by their respective names, in an editorial column in my magazine the following month. Shortly, I will relate details of the incident, but I bring this matter to your attention today because of an Op-Ed piece in The NY Times the day before Christmas and a Letter to the Editor in response that appeared this morning. 

Like many of you who read Delia Ephron’s commentary, I identified with her hellish online shopping experience (http://www.nytimes.com/2012/12/24/opinion/the-hell-of-online-shopping.html?_r=0). Yours and mine might not have come at the hands of overburdened and doubtless underappreciated J. Crew order fulfillment workers, but we’ve probably all been disappointed when the online purchase we made failed to deliver the desired result, whether it be because of late arrival, improper packaging, wrong product, a missing or incorrect note, or some other blunder. Given the volume of non-store retailing these days—nearly $100 billion—mistakes are bound to happen. It’s human nature to want to get even, but when you have a bully pulpit, as Ephron had via The Times, and I had in Chain Store Age, you possess retaliatory power that may be disproportionate to the offense incurred.

That was a central point of the response from Millard Drexler, chairman and CEO of J. Crew. His first sentence said it all—”I was more than surprised that a customer complaint was elevated to an indictment of online retailing on your Op-Ed page” (http://www.nytimes.com/2012/12/27/opinion/rating-the-online-shopping-experience.html). 

I am not against citing retailers, by name, if their strategic practices warrant criticism. But public exposure must be commensurate with the crime. Specificity is desired in journalism, yet singling out one retailer for misdeeds common to the industry is a little too heavy-handed, especially when they are not germane to the overall viability of that retailer. 

Now, on to details of my near-arrest but nevertheless arresting experience. I arrived at the home center at 12:30 pm on a Saturday. I quickly found the Toro snow shovel, got in line and waited my turn. And waited my turn. And waited my turn. By 1:20, my patience had been exhausted. For some reason the store manager had scheduled half of his cashiers for their lunch break at the same hour, during prime shopping time. Lines at the open registers were 10 deep, and growing. From his perch in the office near the front of the store the manager looked on without shifting into overdrive. Customers were getting militant. They were demanding action. Open more registers, they cried. I was caught up in the revolt. 

The store must have expected such behavior because it employed a burly security guard, an off-duty patrolman from the town, which too shall go nameless lest I find myself once more face-to-face with a officer of the law from that community. The policeman-cum-security guard confronted me. He asked if I had a problem. I said I did. He inched closer. He repeated his question. I quickly realized several things. First, he was much bigger than I. Second, he was a policeman and could easily arrest me on any number of pretenses (that town was notorious for its aggressive policing). Third, the 20% discount on the snow shovel wasn’t worth an arrest. Fourth, it was a short walk to the Caldor in the same shopping center where I could buy the same product, albeit at full price. Fifth, actually, there was no fifth. By that number I had determined the wiser course of action was to hand the snow shovel to the guard and walk out of the store. 

In case you’re wondering, the retailer exacted a printed apology from me two issues later for overstepping my “editorial privilege” for extrapolating one incident into a chain-wide defect. I never went back to that store or chain. Several years later the company went out of business, partly because Home Depot had arrived in its trading area, partly because the lack of service throughout its store network failed to provide a reason customers would remain loyal to it. I gleefully noted its demise. But not in print. 

(By the way, as long as I'm admitting to being less than perfect, I have been advised by my wife I would not make a good scientist. Seems my disdain Wednesday for research into the effect air conditioning might have on lowering the death rate during times of excessive heat was ill-placed. Gilda says it is quite useful to study what might seem to be common sense as it could be discovered just the opposite effect transpires. In the case at hand, it might have shown people better tolerated extreme heat before the widespread placement of air conditioning in homes, offices and public buildings. Mea culpa.)