As businesses struggle to hold on, New York’s Soho area is starting to see store after store closing its doors, with difficulty selling both low and high-end products, some retailers say in this climate, “people aren’t spending.”
“It’s not Trump,” said one downcast store-owner recently. “It’s not the economy. Something else is happening.”
Just this week, Credit Suisse downgraded the retail sector, citing issues both in Washington and faith in stocks as well as general economic feels.
Richard Hayne, chief executive officer of Urban Outfitters spoke earlier this month comparing the current state of the retail sector to the housing crisis of 2008.
The Guardian reports:
Earlier in the month, Richard Hayne, chief executive officer of Urban Outfitters, equated the woes facing retail in 2017 to the housing market of 2008. Hayne traced the problems to over-expansion in the 1990s and early 2000s, noting that the US now had six times the retail space per capita of either Europe or Japan.
“The US market is oversaturated with retail space and far too much of that space is occupied by stores selling apparel,” he said, anticipating that retail retrenchment would continue “for the foreseeable future and may even accelerate”.
Urban Outfitters, a Columbus, Ohio-based company that operates roughly 200 locations for stores under its own name and Anthropologie, said that despite sales declines in the single figures, it still planned to open 15 new stores in North America this year. That figure is a drop on previous years but looks rosy next to mass store closings recorded by rivals.
In the past several months, Macy’s has announced it will close 63 stores; Sears, 150; The Limited, 250; BCBG Max Azria, 120; Guess, 60; American Apparel, 104; Abercrombie & Fitch, 60; JCPenney, up to 140.
While retail executives are keen to state they do not plan to abandon bricks-and-mortar retail entirely, many now tend to see it on equal terms with online operations. Main Street, hollowed out by web-based competition, is increasingly viewed as a tool to be used by consumers “showrooming” – browsing – before buying online for less.
The cost in jobs is stark, with Macy’s saying it expects to see 10,000 workers laid off, including 6,200 managers, or 17% of executives.
“We have been planning this very carefully,” said Jeff Gennette, Macy’s president and new CEO, announcing the cuts. “This is not something we did quickly.”
In some areas of Manhattan, retail rents have declined 10-15%. But it has come too late for many retailers. The cycle of the change is apparent across much of downtown, with chains that pushed out smaller independent stores now closing too.
There is no immediate solution, said Justin Levinson, a former reporter who began creating an interactive map of vacancies last year. He believes landlords with large portfolios have been unable to drop prices significantly without experiencing a ripple effect, so they often prefer to take a loss on one property rather than drop prices across the board.
Simply blaming landlords for pushing rents too high is an overly simplistic explanation for the malaise, however. This is not urban blight in the sense that neighborhoods are abandoned, but something else – it is high-rent blight.
“The retail landscape has changed,” Levinson said. “It’s many factors coming together to create increasing instability and retailers are struggling to adapt.”