AMAZON CLEARS THE RETAIL FIELD

My previous commentary on the demise of the traditional shopping mall focused primarily on the big anchor stores in the major shopping centers in San Diego and around the country. Since the posting of that blog, there have been a series of news releases concerning major retail outlets struggling to avoid bankruptcy or closing hundreds of stores and trimming back brick-and-mortar operations.

Probably the most prominent is a company that was once the world’s largest retailer during its 130 years history. Sears, Roebuck began in 1886 as a watch company in Minneapolis and launched the famous catalog that that eventually offered more than watches and jewelry. By 1906 Sears was a public company still operating as a catalog retailer. The first Sears brick-and-mortar store opened in Chicago in 1925.

The company continued as an innovator with brand products such as Craftsman tools, Kenmore appliances and Allstate Insurance, among many other products sold under the Sears brand.  Kmart acquired Sears in 2005 continuing as Sears Holdings. Online shopping and large discount stores began to eat away at Sears sales. A decade ago there were 3800 Sears and Kmart stores in the U.S. and Canada, now reduced to 1430 stores.

Recently the company reported $4.2 billion of debt with annual revenue decline of 12%. Financial advisers question whether Sears can continue as a going concern (an audit term meaning liabilities exceed assets). This is a classic example of how traditional retailers operating in regional shopping malls became victims of online shopping.

The latest high-profile retailer is sending signals that its brand name and premier locations are not sustainable. Ralph Lauren is closing its flagship store on 5th Ave. in New York and may be closing other locations. A number of specialty chain stores like PaylessShoes, Wet Seal, American Apparel and J. Crew are closing hundreds of stores and facing bankruptcy.

These are the trendy fashion brands that must constantly replace their merchandise with hot new designs to stay in business. Fickle shoppers now shun brand names and can find their clothing on the Internet. Younger shoppers no longer are loyal to certain brands carried by the brick-and-mortar stores.

Other high-profile retailers are practically on the chopping block. Macy’s may be a takeover by Canada’s Hudson’s Bay Co. that already acquired the Saks Fifth Avenue and Lord and Taylor brands in the U.S. Another pioneer icon retailer, J.C. Penny, is closing 140 stores and two distribution centers.

Macy’s, a major anchor store in Mission Valley, closed its doors in March leaving the mall a food and entertainment center with specialty shops.

What is happening to consumer retailing? One simple word: Amazon. Enter the beast that is driving established retailers into the swamp like prehistoric dinosaurs. The attached cartoon by Steve Breen in The San Diego Union-Tribune says it all, “Amazon is washing us away.”

The situation is not going unnoticed in the commercial world. The Economist featured a cover story that began, “Investors think Amazon is going to grow faster, longer and bigger than almost any firm in history.” It’s not just consumer retailing driving the giant to new highs. Space travel, cloud computing and self-driving autos are in Amazon’s future. This year the aggressive company captured the streaming rights for NFL’s Thursday Night football. Already Amazon is threatening Netflix by expanding its Prime Video to more than 200 countries.

That’s quite a success for a pioneer online retailer that started as a book and music dealer and drowned the major chains of national book dealers, record stores and video libraries. It is now the fourth most valuable company in the world.

Besides the damage to the major traditional retailers, online shopping is stripping the vast span of shopping malls of tenants to fill the immense spaces with anchor stores. Since the early days in the 1950s, the growth of retail centers, built away from central downtown main street sites, changed the shopping patterns of consumers. Convenient parking and a wide choice of products in one place was popular with the post-war public.

Shopping mall developers created the anchor-store concept. Every major mall needed at least three to draw the crowds and to provide the developers a flow of lease revenue.

All of this historic progress for retailers is changing. Amazon provides convenience for a younger shoppers that find other use of their time than browsing around shopping malls.

As an historic addendum, here are the prominent retailers and food chain stores that have evaporated. If you grew up in Southern California in the mid-20th century, you will remember these popular names: Broadway, Robinsons, May Co., Bullocks and Marston’s department stores; A&P and Safeway grocery stores; Van de Kamp Bakery (in quaint windmills), Carnation Dairy, Rexall Drugs (with soda fountains) and Howard Johnson restaurants (best ice cream).

Actually there is one Howard Johnson still operating at Lake George, New York. At one time, the popular roadside chain had over 1000 units. Like today’s ubiquitous Golden Arches, the orange roofs of Howard Johnson could be seen down the road.

 

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