Anchors Aweigh: Big Retail Overshot the Mark.

The retail boom began when I was still in university, it was 1996 or 1997. What was happening about then was the growth of suburbs and along with that was the construction of ‘big box’ stores and shopping malls with big anchor tenants, multi-screen theaters and all sorts of food. Big box stores, like Circuit City, are giant stand-alone stores that sold things of a particular category, unlike a general merchandiser like Walmart. It was sort of putting all your eggs in one basket, except that the suburban construction boom was so ‘hype’, consumers updating technology seemingly every year or adopting them to stay current, that it seemed like there would be an inexhaustible supply of customers. One of the retailers at the time that was doing so well was Blockbuster Video rentals, which is now out of business. Blockbuster over-extended itself in the wrong direction and then tried to change direction mid-leap, using up all of its cash while operating money losing extensions that dragged down the ‘winning formula’ of its video-rental operations.

Video-gamers, who are the consumers pushing for faster hardware and internet, were offered games online the way we could update Windows online. The success of online games where players paid subscription fees was a revolutionary turn. That perhaps was a new moment for e-commerce and it was hard to imagine the demand for networked gaming nor that young video game players would pay for that service. That surprising turn of events would lead to the Amazon phenomenon of today. Back then Jeff Bezos was still an investment banker and yet to come up with the idea for Amazon during his cross-country drive. That might have happened a year later.

So back to retailing which got caught up in a real-estate boom. Blockbuster spent all of its cash doubling perhaps tripling its locations. The supply chain also changed. Kathy Lee Gifford, at the time the popular co-host of Regis & Kathy Lee, had to address child-labor and sweat-shop charges against her clothing brand. This was just one case against many clothing lines. And it’s also the underpinning of American Apparels brand which is fair-wage and higher-materials; everyday luxury wear that is now its own segment (luxury cotton sweat-shirts, etc). So I jump to now.

The Limited on Sunday began closing all 250 locations and laying off 4,000 employees..mall anchors Macy’s and Sears are closing hundreds of stores amid large sales declines. (The Limited Is Closing All 250 of Its Stores)

JCPenney has said it will close 140 stores (What will happen to Bay Area stores, as trouble looms for retailers?)

Payless’Shoes (will be) closing nearly a quarter of its 4,400 stores (1,100 stores)..Crocs, J.C. Penney, Chico, BCBG Max Azria, Kmart, and American Apparel all each have over 100 retail locations bidding farewell this year. Other apparel labels with significant shutterings on the docket in 2017: Guess and Abercrombie & Fitch, with 60 closures apiece, plus American Eagle, Eastern Mountain Sports. (These Beloved Mall Stalwarts Are Closing A Lot Of Stores In 2017)

At the time I thought a lot of the hype in the retail sector was driven by fervent retail consultants, enthusiastic reporting of good news, bigger magazine issues and excellent grass-roots marketing that had everyone talking brands like status symbols. What was a computing thing or a sneaker thing became a mass media thing. I had read another forecast, by business forecaster Faith Popcorn, and what she said made me think this retail arc would hit a peak and slide back. Yet as it always happens, you can never time the economy even if you think you know what would likely happen (and it is happening now). But underlying this boom in suburban construction and consumption was sub-prime mortgages. Being able to buy a house when they wouldn’t give you a bar tab lead to a major recession. At the top end of this risky financial structure were very obviously rich people, that it served to fuel this activity.

And what Faith Popcorn said was that those who do own homes will be more interested in looking after it and doing things ‘homebodies’ do which isn’t necessarily looking ‘hot’ all the time. They’d be more interested in lawn-mowers, upgraded appliances and having kids. They’d be spending money around birthdays and work vacations. I believed her because it was the natural cycle of life, and she is good for having the data to back it up. So to me we were on the cusp of another baby-boom not a singles boom. Millennials also proved to be less big-spenders, saving practically right away for those things. Except they’re also all out of work. And now Gen-X’s are also out of work.

As for Amazon, I read, and you can find it using a search engine, in a magazine, that only the Entertainment industry has really gone digital. Many other segments aren’t really up on digital. But again this is a very broad outline because going digital means both ‘operationally’ and ‘communicationally’. Operationally film studios have been digitizing movies onto digital formats to save costs in many operating tasks like transport and preservation. Communicationally, it was really Netflix, relatively new itself, that’s been able to draw consumers. Both Walmart and Amazon are at the very fore-front of digital, both inward facing and outward facing. So when people say going digital will raise future revenues as if it were an innovative product, do they mean inwardly or outwardly, because among retailers only a few have made that investment. Is it enough to have an app for outward e-commerce when operationally you aren’t digital?

In conclusion, these retail chains that are down-sizing weren’t actually big money-makers. Their location can be filled by non-chain stores, like the ones that sell back-packs and purses or a shoe liquidator that you’ve seen. These retail brands are called ‘lifestyle’ brands which means they didn’t sell clothes, they sold an image. So if that type of image went out of style, they also suffered. Apparently, in another article, Ken Morris of Retail Partners, said that customers are buying experiences and food. That means the way they live, their friends, and their routine will also dictate the required fashion, not the other way around.