Business Columns & Blogs

Retailers like Shopko, Macy’s, Sears and Gymboree face uncertainty in 2019

Sears in South Hill to close

Along with over a hundred other Sears stores nationwide, the South Hill Mall store is on a list to be closed due to the retailer's bankruptcy.
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Along with over a hundred other Sears stores nationwide, the South Hill Mall store is on a list to be closed due to the retailer's bankruptcy.

The holiday retailing season is done, the numbers are being tallied and now we’re finding out who staggered through, who isn’t going to make it without some cuts and who isn’t going to make it even with trimming or hacking away.

Much like the weather, it’s not an encouraging start to the year:

Shopko, a 360-store discount department chain based in Green Bay, Wisconsin, has filed for Chapter 11 reorganization and plans to close more than 100 locations. Four Washington stores are on the hit list — Lacey, Spokane, Pullman and Yakima. The company also has stores in Wenatchee and Union Gap.

Macy’s is closing its Redmond Town Center store this year and its Northgate store next year.

Children’s apparel retailer Gymboree, also in Chapter 11, has elected to close most of its stores. Gymboree is well represented in Western Washington, with at least 10 locations including Tacoma and Puyallup.

If that seems a thin list considering the number of names that appeared on previous roll calls, keep in mind that it doesn’t include previously announced waves of store closings spilling into 2019, some smaller outfits we missed in 2018 (gadget retailer Brookstone, for example) and companies that plan to whack stores, sometimes by the dozens, but have yet to specify which locations.

Nor does it account for the ongoing soap opera that is Sears/Kmart, as its lead investor and creditors wrestle over the future of the company — as in, does it have one by stumbling along in search of a marketing position that would compel shoppers to return, or should it admit defeat and close up shop.

That’s a conversation many retailers, even the comparatively healthy ones, will be having in 2019.

Each of the retailers announcing retrenchment or termination has its own set of circumstances and reasons for those decisions, specific to their histories and niches. For example, the Shopko announcement includes the sort of boilerplate language typically found in such releases — “operating a smaller and more focused store footprint” — but in this case it’s probably accurate.

Shopko’s strength is in the Midwest. Out in the Pacific Northwest it wasn’t a significant player against national and regional chains like Walmart, Target, Fred Meyer and Costco (not to mention the drugstore chains who wander onto the discount retailers’ turf). Paring back to a region where it has a larger and more concentrated presence provides an opportunity to capitalize on being better known with shoppers, as well as whatever distribution synergies are to be gained by not having such a far-flung empire. That’s the theory, anyway.

There’s also a common thread running through all these closure announcements — the inexorable and irreversible shift of consumer shopping to the internet.

The retailing establishment has gone from ignoring online retailing to dismissing it to trying to catch up and compete. At this point the discussion is at the stage of figuring out whether to stay in the game (with a strategy that combines physical stores and online shopping), get out of the way, try something else or give up.

It’s not an easy time or environment in which to be making those decisions. The economy is doing OK, but how much longer can the current expansion phase of the cycle run? There’s no certainty as to what approach — internet or stores only or a mix — will work, or in what balance. The track record of businesses cutting to survive is not great. Then throw in the issue of delivery, a service everyone believes they have to have but no one knows how to offer profitably.

To that add some specific challenges to operating retail in Western Washington. Retailing is already a thin-margin business. Between galloping rent and lease rates, higher labor costs and higher taxes, those margins are getting squeezed to the point of invisibility.

That’s a lot for retailers to weigh, and they’re not the only ones facing some heavy thinking about retailing in 2019. Property owners, especially of large malls, are wondering what to do with their buildings when retailing tenants are shrinking or disappearing. Northgate is being radically redone as a mixed-use property to include a practice facility for Seattle’s new hockey franchise. Malls are looking at entertainment, education, health care, offices and anything else that will draw customers and fill vacant spaces.

The transformation of retailing has been 25 years in the making — if you’re counting from the founding of a certain Seattle-based company — so 2019 isn’t going to be a “year that changed everything, and everything changed.”

It is shaping up to be a year in which an accumulation of decisions by consumers and retailers over the last two decades combined to force much more dramatic decisions. 2019 will be an eventful year in retailing; for some stores and, in a few cases, entire companies, it could be the last one.

Bill Virgin is editor and publisher of Washington Manufacturing Alert and Pacific Northwest Rail News. He can be reached at bill.virgin@yahoo.com.
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