America’s ‘Retail Apocalypse’ Is Really Just Beginning

Malls hold no interest for me whatsoever. There&#x27;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&#x27;s singular focus: Spend, spend, spend: shop till you drop mentality.<p>However, I do feel bad for the people that will lose their jobs over it.<p>Let&#x27;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&#x27;s okay to have some retails stores sprinkled around here and there, as long as they&#x27;re original, and not those mass market plastic selling behemoaths we see everywhere.

Walmart 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&#x2F;supplier&#x2F;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.<p>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&amp;L crisis. Low interest rates helped overbuilding recover by making real-estate development more attractive and creating higher relative returns from real-estate investment.<p>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.

&gt; 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.<p>Oooh, I am so happy if this really happens. The entire financial industry that makes &quot;profits&quot; from loading purchased companies up with debt and then leaving them to die needs to burn in a fire.<p>The strategy certainly works in the short term (and nets impressive &quot;profits&quot; for the owners&#x2F;shareholders of such holdings), but in the long term... let&#x27;s just hope no one will ever be able to pull through this kind of &quot;deal&quot; again.

The &#x27;Retail jobs growth by state&#x27; chart in this article (approx 2&#x2F;3 down the page) is lovely: one square line chart for each US state, positioned roughly according to geography, all equal in size.<p>I find it very easy to grok compared to choropleth maps and similar charts that attempt to stay true to geography.<p>Unlike other non-map presentations of US state data, this layout preserves ability to spot regional similarities visually.<p>Is there a name for this kind of chart layout?

Full disclosure: I am the co-founder and lead developer at <a href="https:&#x2F;&#x2F;www.locally.com" rel="nofollow">https:&#x2F;&#x2F;www.locally.com</a>. We do exactly what I describe below and we&#x27;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.<p>IMHO, the real path forward for retail is to get their in-stock goods in front of online shoppers via their brands&#x27; web sites, their own web site and local marketplace sites. Ecommerce is not the solution because nobody can expect to compete with Amazon.<p>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.<p>Yes, the day of reckoning for retail is coming. But it won&#x27;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&#x27;t have the data and tools (yet) to drive traffic to stores. They&#x27;re still figuring out the Amazon problem.<p>We&#x27;re getting there though.

I live near Lenox Mall and Phipps Plaza in Atlanta, and they could not be any busier. It&#x27;s packed at 2pm on a Tuesday when I&#x27;m going to an eye doctor appointment. On the weekends there are often traffic issues in from people entering and leaving.<p>I feel like it&#x27;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?

in 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.<p>Anyone got a reasonable way to synthesize those competing thoughts?

This is going to be brutal over the coming decade. &quot;The most recent government statistics show that salespeople and cashiers in the industry total 8 million.&quot; Contrast that with 70k coal workers. Imagine the devastation in the coal belt spreading to suburbs all over mid America.

Articles like this are starting to ring little bells for me. There&#x27;s an argument that the government&#x27;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.<p>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&#x27;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.<p>It seems like it&#x27;s possible that we&#x27;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&#x27;ve seen other articles [2] talking about those sectors starting to show weakness as well.<p>[1] Not a source that I&#x27;d usually cite, but here&#x27;s Krugman in 2005: <a href="http:&#x2F;&#x2F;www.nytimes.com&#x2F;2005&#x2F;08&#x2F;29&#x2F;opinion&#x2F;greenspan-and-the-bubble.html" rel="nofollow">http:&#x2F;&#x2F;www.nytimes.com&#x2F;2005&#x2F;08&#x2F;29&#x2F;opinion&#x2F;greenspan-and-the-...</a><p>[2] <a href="https:&#x2F;&#x2F;news.ycombinator.com&#x2F;item?id=15593880" rel="nofollow">https:&#x2F;&#x2F;news.ycombinator.com&#x2F;item?id=15593880</a>

I really hate investment firms that operate entirely on financial trickery instead of actually sound business activities that increase productivity.<p>I still think there&#x27;s a problem with retail, but adding the above seems like salting the earth you&#x27;re trying to grow a diverse farm in.

Retail is the prime example of middleman business. The middleman businesses don&#x27;t produce anything by themselves and attempt to extract profits via information asymmetry and&#x2F;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.

I&#x27;d imagine this is also partly due to the America&#x27;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&#x27;t keep up the consumption. Generation Y is slowly entering a consumption phase.

The 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&#x27;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.

There&#x27;s lots of talk here about the changing shopping habits of Americans, but I think we&#x27;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&#x27;s habits change all the time and it seems management was asleep at the wheel.

Make sure you read the article and don&#x27;t just come here to comment: there&#x27;s an important point that this isn&#x27;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.

Very nice graphs to illustrate and support the points.<p>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.<p>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.<p>Very inspiring to read, especially for the graphs.

I&#x27;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.

Retail is dependent on consumer spending. As more stores close the remainder should be more profitable, which should minimize ripple effects.

The common thread I&#x27;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.

Retail jobs are already a dead end and this news doesn&#x27;t make things any brighter. The structure of having space that many people go to during the day with ample parking seems sound enough...<p>Is there some kind of job that actually needs to be done that wouldn&#x27;t better be filled by automation? If not, maybe light automation (local 3D printing and final assembly) could move to such spaces.

Even 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?

Big 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...

One strong headwind to this trend is <i>fraud</i>. Seller fraud is well-known, and payment systems have bent over backward to insure this, but <i>buyer fraud</i> is even more popular these days. It&#x27;s easy to cheat a seller:<p>I&#x27;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&#x2F;serve, show the credit card on the video monitor, a photo-id, plus incidentals that give a sense for <i>who you are</i>. 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 &quot;just don&#x27;t like&quot;.)

The 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&#x27;s and 90&#x27;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.<p>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.

Some context - I live in Buffalo, one of the areas in the 10-25% range.<p>You can&#x27;t give away commercial space here in Buffalo. Prices are &lt;$1&#x2F;sq in a lot of places. A few years ago, ~60% of the commercial space in North Buffalo was vacant.<p>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&#x2F;out type of location.<p>But there are still many commercial vacancies. I don&#x27;t know a lot about zoning, but many of these locations should really be repurposed to residential. There&#x27;s also a large sprawl problem.<p>Finally, it looks like Niagara Falls was included in that statistic and Niagara Falls is an absolute shithole.

Now all of a sudden, I want to go to America just to see how terrible and horrible the shopping malls are.<p>I&#x27;m from Australia which is full of them (though we call them &quot;shopping centres&quot;). And they seem very pleasant to me. They are convenient for many kinds of shopping. I didn&#x27;t hang out there as a teenager in the &#x27;90s, but others from my school did.<p>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&#x27;s favourite cafe is at a shopping mall -- and it is reallyp excellent.

For 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.<p>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.<p>I would think the competition from online made them do this. They are in a good location and didn&#x27;t have to worry much about bringing in customers before.

It 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&#x27;re trying to fight the good fight.

Retail stores don&#x27;t sell what I want. Their inventory has become too limited.<p>After the dot com bust&#x2F;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.<p>I&#x27;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.

Im curious as to what the response will be from regulators when these loans start to mature. I&#x27;m assuming none of these companies are &#x27;too big to fail&#x27;, and will be allowed to fall apart. That&#x27;s the big difference between 2008 and now I think. Will anyone want the assets of Macy&#x27;s, Kohl&#x27;s, etc. once commercial retail collapses? It&#x27;s going to be a real disaster I think, and unfortunately the hardest hit will be the poorest Americans once again. Big winner? Amazon...

Well, you can&#x27;t beat dollar store prices for quality items directly shipped from China. Amazon has some real competition on their hands.

&gt;<i>In the U.S., retailers announced more than 3,000 store openings in the first three quarters of this year.</i><p>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).

I&#x27;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&#x27;t keep up.

Did 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.

Is all about making the experience better to compete with online shopping. Retail can check out how movie theatres differentiate themselves from the living room.

Fuck retail. For decades they have been fleecing customers.<p>Now I&#x27;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.<p>I do feel bad about people losing their jobs. But the discounters and upmarket stores will always survive.

It&#x27;s a prelude to overdue broad market downturn IMO.

this is all coming together nicely with this amazing market bull run from 2009 coming to an end some time in the near future.<p>timing the event is hard if not impossible.

Please remind me, if I&#x27;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!

So much for &quot;service economy&quot;.

imo this comes down to centralization and the popularity of &quot;big box&quot; stores. People generally don&#x27;t want to go to a specialty store anymore, the toy section at Walmart is fine.