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January 13, 2017

Bill Virgin: Retail fail list keeps growing, and it's only January

The News Tribune

Bill Virgin

Let's stick to the retailing theme we were working on last week, in the wake of store closings by Kmart, Sears and Macy's, because news continues to come in from that sector, much of it with local implications, little of it good:

  • The Limited has closed all 250 stores nationally, although it will continue to operate as an online-only apparel retailer.
  • The Gap is closing its Alderwood Mall store.
  • American Apparel, which at one time had more than 200 retail locations in the U.S. and abroad, has been acquired in a bankruptcy court sale by a Canadian company that doesn't plan to take over the stores.
  • Sportsman's Warehouse, a Utah-based chain, is adding three stores in 2017, including one in Everett.

Hey, how did that upbeat bit of good news get into the discussion?

It's there to illustrate that while doom and gloom is the predominant, and strongly justified, attitude in the bricks-and-mortar retailing world, it's not a universal condition. Some segments of retailing, and some companies throughout the industry, are doing all right. Some have adapted to the new realities.

Given just how much gloom and doom there's been, it would be tempting to conclude retail is hemorrhaging jobs. Not quite true. The Employment Security Department says retail employment in the state, at roughly 379,200 jobs, is up by 10,700 jobs from a year ago. Big gainers include motor-vehicle and parts dealers, and general merchandise, building material and garden-supply stores. The big loser? Not surprisingly, given recent announcements, it's the clothing and clothing-accessories category.

For some parts of the country, such as ours, retailing is in decent shape. Says a report from commercial real-estate services firm Kidder Mathews, "The retail market is strong in the core markets of Seattle and the Eastside, where most of the employment growth is occurring. The balance of the market ranges from stable to slightly soft. There is positive absorption, new construction and a strong investment climate for stabilized centers and single tenant net leased properties."

But let's not pretend that the sector doesn't have some deep, broad and permanent problems. The recession and the weak recovery that followed are to blame for some of retailing's woes. So is online shopping. But some companies were flailing well before either of those trends. In business, there are cyclical recessions, driven by customers not spending as much as they had. Then there are structural recessions, driven by changes in technology or consumer preferences. Retail has endured both types.

How retailing copes or doesn't has huge implications across the economy. There are the employees and owners of those stores whose livelihood depends on them. Property owners who no longer can count on growth in retailing to fill the storefront, be it on a street or in a mall or strip center, will have to find new uses and types of tenants. Developers will be rethinking how, what, where and whether to build, if existing retail-based models no longer work.

And then there's us, the great consumer horde, whose shopping and spending behavior is reshaping the retail landscape, which in turn is reshaping our behavior.

People in the business are experimenting with new approaches. One is food-based. Colliers International, also a real-estate services firm, recently observed that "people are dining out more often at all price points, new restaurant and food concepts are exploding and opportunities are being created for retail centers of all types." The food court, once an add-on at many malls designed to keep shoppers on the property and spending, is now the centerpiece. "Whether dining out leads to additional retail spending depends largely on how easy it is to 'cross-shop,' " the Colliers report suggests.

Indoor farmers markets and food halls, made up of small individual shops and stalls, have been popular in other cities, including in the U.S. Might a developer take a retail property that no longer thrives in its current configuration and redo it so it houses multiple restaurants or food shops? Keep an eye out for that one.

Colliers also says some retail developments will shift from chain stores to smaller, more distinctive shops, using customization and specialization to attract shoppers who won't go to a mall that has the same stores as every other mall.

Marcus & Millichap, meanwhile, sees housing and offices being added at regional projects such as Redmond Town Center, Crossroads and Totem Lake Malls, "creating a built-in customer base."

Consumers' lives change, so retailers and retail developers expecting to continue counting them as customers will have to change, too. The general store, the downtown department store, the suburban regional mall and the strip mall were all innovations in their time. Time for the industry to innovate again.

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