Connect with us

Business News

The worst of the retail apocalypse is on the way

(BUSINESS NEWS) We’ve long lamented the decline of big box retail, but one report says the “Retail Apocalypse” is just beginning and it’s about to get much worse.

Published

on

store closings retail apocalypse

You have likely already noticed the impacts of what has been darkly dubbed America’s “Retail Apocalypse”: Half-empty strip malls, brightly-colored signs announcing closing sales, or maybe your once-favorite department store has declared bankruptcy.

Whatever you’ve seen, it’s only going to get worse, according to a comprehensive report from Bloomberg, implying certainty in the fall of the retail industry as more than just sensational news headlines.

U.S. retailers announced more than 3,000 store openings in the first three quarters of this year, but that’s coupled with 6,800 chain store closures. All while consumer confidence levels are high and unemployment is low, and the economy keeps growing – a mix you’d think would be conducive to retail growth and strength.

However, more and more retail chains are filing for bankruptcy and financially distressed. This has caused an increase in the number of delinquent loan payments from malls and shopping centers containing said retailers.

So what’s the deal?

No, it’s not because Amazon.com is taking over the world (yet) or because millennials would rather travel than buy more “stuff.”

The primary cause for the retail apocalypse is not buying habits, it is that many failing retail chains are overloaded with debt.

There are billions of dollars tied up in the borrowings of troubled stores, and that strain is going to become even harder for the market to handle.

The impact of retail’s crash and burn will be felt across the country and economy. Low-income workers will be displaced, local tax bases will shrink, and investor losses on stocks, bonds, and real estate will grow.

In a nutshell: It’s only going to get worse.

Until recently, retailers avoided bankruptcy by refinancing their debts. However, as the market has evolved, lenders have become less forgiving, according to the Bloomberg report.

Additionally, an overwhelming amount of risky retail debt is coming due within in the next five years. For example, teen costume jewelry chain Claire’s Stores, Inc. has $2 billion in borrowings that will start maturing in 2019 – and it still has 1,600 stores open in North America.

In fact, $100 million of high-yield retail borrowings are set to mature this year alone and that will jump to $1.9 billion in 2018, according to Fitch Ratings Inc. data cited by Bloomberg. Between 2019 and 2025, that figure will expand to an annual average of almost $5 billion.

And, while the demand for refinancing increases, credit markets are tightening. Thus far, retailers have delayed their doom thanks to the money the Federal Reserve has pushed back into the economy since the Great Recession. Low interest rates made the risker retail debt (and the higher return it brings) more appealing. But now as the Feds raise their benchmark interest rates, that demand will decrease.

Then there’s the matter of store credit cards. The largest private-label card issuer, Synchrony Financial, has already increased reserves in order to help cover loan losses this year. Citigroup, Inc. has reported declining rates on retail portfolios, too. Why? Because shoppers are more likely to stop paying back their retail card debt if the store they went to has closed.

As all this compounds, it could directly impact the industry that employs the largest number of Americans who are at the low end of the income scale. According to Bloomberg’s research, salespeople and cashiers in this industry totaled a whopping eight million. Since our last financial crisis, employment rates have been steadily increasing, even in the retail industry. Until this year, that is. Retail store jobs have decreased by 101,000 this year so far, no thanks to store closures.

Many of the largest U.S. retailers (think Target and Walmart) have decided to reduce their brick-and-mortar space. Sure, the e-commerce boom has taken a toll, but the U.S. has been considered “over-stored” ever since investors poured money into commercial real estate as the suburbs boomed decades ago, which began an era of big box stores.

It’s time for that boom to bust.

At the end of Q3, 6,752 U.S. retail locations were scheduled to close, excluding grocery stores and restaurants, according to the International Council of Shopping Centers. That’s more than double the 2016 total and inching close to the all-time annual high of 6,900 recorded in 2008, the midst of the recession.

Clothing stores have taken the hardest hit, as 2,500 locations are closing. Department stores aren’t faring well, either. Macy’s, Sears and J.C. Penney are all downsizing.

Overall, about 550 department stores plan to close their doors.

This really does sound apocalyptic, doesn’t it?

The consumer impacts of what’s to come will be widespread. Ohio, West Virginia, Michigan and Illinois have been some of the hardest hit so far, but other states will feel the burn, too. Florida, for example, relies on retail salespeople more than any other state, according to Bureau of Labor Statistics cited by Bloomberg.

Insert a grimacing emoji face here.

I think Charlie O’Shea, a Moody’s retail analyst for Moody’s, summed up the retail industry’s prospects impeccably at the end of Bloomberg’s report: “A day of reckoning is coming,” he said.

Sienna is a Staff Writer at The American Genius and has a bachelor's degree in journalism with an emphasis in writing and editing from the University of Wisconsin Oshkosh. She is currently a freelance writer with an affinity for topics that help others better themselves. Sienna loves French-pressed coffee and long walks at the dog park.

Continue Reading
Advertisement
1 Comment

1 Comment

  1. Paul O'Brien

    December 4, 2017 at 1:43 pm

    As is what’s happening with many other industries, retail’s reckoning will come and through it retailers will wake up to the fact that what people are willing to pay for is experiences.

    What the heck does that mean in this context??

    I’m not going to drive and shop at a local retailer to get the exact same plastic junk or $5 shirt that I can get Amazon to send to me in an hour.

    But let’s not neglect that people like to shop – as an activity or social experience. Shopping isn’t just about consuming the things we want or need – it’s a matter of what it has always been in certain contexts: an experience to see products, hang out with friends, or just spend some time doing something you enjoy.

    The reckoning is in the price competitive stores pushing commodities, aggressive Sales pressure (autos), and regularly purchased products. There is no market for a store front for those things.

    But what we might be excited about that could thrive are the experiences we enjoy: Local artists and products, food & beverage, specializations in innovative goods (tech, apparel, autos), etc.

    “Clothing stores have taken the hardest hit, as 2,500 locations are closing. Department stores aren’t faring well, either. Macy’s, Sears and J.C. Penney are all downsizing.”
    — Yeah… because I don’t need to drive, park, and deal with the awful layout of a big box store just to get the same pair of jeans I’ve been buying for the last 20 years.

Leave a Reply

Your email address will not be published. Required fields are marked *

Business News

Is insecurity the root of overworking in today’s workforce?

(CAREER) Why are professionals who “made it” in their field still chronically overworked? Why are people still glorifying a lack of sleep in the name of the hustle?!

Published

on

startup optimize to key metric

So you got that job you wanted after prepping for months, and everything seems cool and good… but you’re working way more hours than scheduled. Skipping lunch, coming in early and staying late, and picking up any project that comes your way. You’re overworked.

Getting the job was supposed to be a mark of success in itself, but now, work is your life and everyone is wondering how you can be working so much if you’re already successful.

In an article for Harvard Business Review, Laura Empson delves into what drives employees to overwork themselves. Empson is a professor of Management of Professional Service firms at the University of London, and has spend the last 25 years researching business practices.

Her recently published book Leading Professionals: Power, Politics and Prima Donnas, focuses on business organizational theory and behavior, based on 500 interviews with senior professionals in the world’s largest organizations.

Over the course of her research, Empson encountered numerous reports of people in white-collar positions pushing themselves to work exhausting hours. Decades ago, those with white-collar jobs in law firms, accountancy firms, and management consultancies worked towards senior management positions to gain partnership.

Once partnership was reached, all the hard work paid off in the form of autonomy and flexibility with scheduling and projects. Now, even entry-level employees are working overextended hours.

An HR director interviewed by Empson noted, “The rest of the firm sees the senior people working these hours and emulates them.” There’s a drive to mirror upper management, even at the cost of health.

Empson’s research indicates insecurity is the root of this behavior. Insecurity about when work is really done, how management will perceive employees, and what counts as hard work. Intangible knowledge work provokes insecurity since there’s rarely ever a way to tell when this work is complete.

Colleagues turn into competitors, and suddenly working outside of your regular hours becomes seen as normal if you want to keep up with the competition. You want to stand out from the crowd, so staying late a few days a week starts to feel normal.

This can turn into a slippery slope, and when being overworked feels like the norm, you may not notice taking on even more extra hours and responsibilities to feel like you’re contributing efficiently to the company.

During her research, Empson found that some recruiters admitted to hiring “insecure overachievers” for their firms.

Insecure overachievers are incredibly ambitious and motivated, but driven by feelings of inadequacy. Financial insecurity and disproportionately tying self-worth to productivity are just a few contributing factors to their self-doubt.

As a result, these kind of people are amazingly self-disciplined, and likely to pursue elite positions with professional organizations. Fear of being exposed as inadequate drives insecure employees to work long hours to prove themselves

Even upper level management is subject to this same insecurity.

Organizational pressures can make even the most established leader overwork themselves.

Empson notes, “Working hard can be rewarding and exhilarating. But consider how you are living. Recognize when you are driving yourself and your staff too hard, and learn how to help yourself and your colleagues to step back from the brink.“

Analyze your organization’s conscious and unconscious messaging about achievement, and make sure you’re setting and enforcing realistic expectations for your team.

Continue Reading

Business News

How employers should react to the new age discrimination court ruling

(BUSINESS NEWS) A court case that could likely land in the Supreme Court is one that all employers should react to and prepare for.

Published

on

age discrimination

In January, the 7th Circuit Court of Appeals determined that then 58-year-old Dale Kleber did not get protection against age discrimination from CareFusion as a job applicant.

For employers, there are some important takeaways. Namely, that Kleber v CareFusion does not give employers open season to only hire young workers.

The Age Discrimination in Employment Act (ADEA) protects employees against age discrimination. There are also protections against disparate treatment under ADEA.

Basically, employers cannot intentionally discriminate against aged applicants. When posting a job, that means you should never advertise for someone under the age of 40 when posting job descriptions.

While Federal law may not apply to older applicants, the Texas Labor Code,  for example prohibits discrimination against people over 40 years of age. Employers should be very aware of inequity throughout the hiring process, whether you’re looking at internal or external candidates. You do not want to be a test case for age discrimination.

How can you avoid violating ADEA and other applicable laws?

First, you should work with your legal counsel and HR department to make sure you are following the law. If you are accused of age discrimination, you should talk to your lawyer before responding. It’s a serious complaint that you shouldn’t try to answer on your own.

Next, go through your job postings to make them age-neutral unless there is a reason for hiring someone under the age of 40. The legal term for this is Bona Fide Occupational Definition. The qualifications can’t be arbitrary. There must be industry standards that determine a definable group of employees cannot perform the job safely.  

Words in applications matter. Don’t ask for GPA or SAT scores. Avoid things like “digital native,” “high-energy,” or “overqualified.” These terms indicate that you’re looking for someone young.  

You should also update application forms that request birthdays or graduation dates. According to the Society for Human Resource Management, you should structure interviews around skill sets, not personal information.

Train those responsible for hiring about the current laws in your state.

Make your managers aware of bias, both conscious and unconscious. It’s not age discrimination that runs afoul of the law, and you must be prepared to confront any situation where it occurs.

Talk about age bias and discrimination in your workplace. Don’t assume that older workers aren’t tech savvy or that they don’t want to keep their skills current. Instead of putting generations against each other, have a multigeneration workplace.

Continue Reading

Business News

Cities are fighting back against the motorized scooter companies

(BUSINESS NEWS) The scooter wars are on, and major cities are filled with them – residents and government are finally fighting back.

Published

on

bird scooters

When the scooter-pocalypse began, it seemed to come out of nowhere. One day, the most annoying thing in downtown traffic was maybe a pedicab, and then the next: a swarm of zippy electric razor scooters.

This sudden arrival was by design: companies like Lime and Uber’s JUMP simply just began offering their services. There was no negotiation with the city, no opportunity even for residents to say whether or not the scooter pick-up stations could be located in front of their houses—just a sudden horde of scooters (for the record, this do-it-first and then ask permission approach was replicated in all major cities across the United States).

Was this illegal? Nope. There was nothing on the law books about the rental scooter technology so there was technically nothing wrong with the companies just assuming that they could do what they wanted. (Some scooterists have since come to think the same thing, committing crimes and breaking rules.)

Now, enough time has passed for cities to have the opportunity to fight back, as a new year of legislative sessions has begun. San Francisco is one such community, which determined that only permitted companies could operate within the city limits—and, surprise, many of the don’t-ask-permission companies were not given these permits.

Lime, blocked from operating, filed a suit against the city saying that they had been discriminated against based on their … rude … arrival.

A judge has since ruled that there was no bias in the city’s review of the permit applications that were later not awarded to Lime.

As the legislation and the lawsuits play out over the next year, it will be interesting to see if the scooter company’s attitudes toward the cities they operate in change.

If, as they have said all along, they desire to be the next major innovation in urban infrastructure, then they need to be prepared to work with and grow alongside the communities that they inhabit.

It would be a wise move, then, to partner with local governments to ensure that both organizations are working in the best interest of the populations that they serve. 

Continue Reading
Advertisement

Our Great Partners

The
American Genius
news neatly in your inbox

Subscribe to our mailing list and get interesting stuff and updates to your email inbox.

Emerging Stories