And the stores are beginning to close

imgres-1The marketplace is changing.  Gap, J. Crew, Abercrombie & Fitch and Coach have all announced that they are closing stores.   I am sure there will be more….and oh how they mighty have fallen.

These stores grew and grew.  They grew as publicly traded companies.  They grew on lots of products that rarely sold at full price.  One could say they grew without a well thought out road map.  One of the pieces of the road map is always marketing.  Store fronts are marketing and many of those are not profitable.  At one point the board, the market, the stock price told them close down those stores that are losing money every single month, take those losses off the books now and our earnings will change.

Many of the new brands such as Warby Parker, Bonobos and others have shifted from a pure ecommerce model to a mixture of both brick and mortar and online sales.  I refer to it as the 80/20 rule.  20% is in brick and mortar where the customer can see, feel and connect with the brand in a different way.  It is marketing dollars well spent if the store works aka is profitable.  I do not believe that you can just open the doors with merchandise but there needs to be a reason for the customer to want to come into the store often when they can visit the the latest and greatest on their mobile device in the privacy of their home.

I refer to all of this as the long tail of Etsy.  People want individuality.  There are multiple shops opening in Brooklyn, LA, Paris and even Bordeaux that are small, conceptual, a mixture of different products that work together and a vibe that makes you want to come in and see whats new while having a cup of coffee.

What does this do for the real estate world?  I would gather that many landlords of buildings have taken the last decade of growth and opportunity to take out another mortgage on their building so they can put more cash in their pocket and raise the rents.  Only large companies such as the Gap, Coach, Abercrombie and alike could afford these ridiculously high rents.

What happens when these stores go empty and the next generation of stores can’t afford the rent?  Nothing pretty.


Comments (Archived):

  1. Stuart Willson

    Aeropostale filed for bankruptcy the other day. I think these companies are getting hit by two opposing forces: on the low end, fast fashion competitors have lower price points and faster inventory turns and on the high(er) end, people are increasingly looking for unique and differentiated experiences, oftentimes with new brands who may be digital-first (your Outdoor Voices of the world).

    1. Gotham Gal

      I completely agree….and they did not see it coming!

  2. JLM

    .Real estate is and always has been a business which is driven by demand. The demand has always been changing. That is the constant.Price has always been held hostage to demand.While single purpose real estate is always going to be a short term bet on a single use, there is very little real estate that cannot be “fixed” by being adaptively reused, renovated, repurposed, or restored.Show me an old mill building and I will show you an adaptive reuse that results in an apartment or office or mixed use property.Prices always fluctuate based on demand. The notion of supply and demand’s impact on prices is not a new wine. It has been around forever, since Adam and Ever got kicked out of the Garden of Eden and had to find alternative living quarters.JLMwww.themusingsofthebigredca…

    1. Susan Rubinsky

      I’ve seen really interesting reuse of malls through my work in the public sector. Unfortunately, you have to wait a long time before a commercial property owner will give up a strip mall to the public sector or to a public-private partnership. Unfortunately strip malls and enclosed malls are a lot uglier than cool old factory buildings.

      1. JLM

        .Austin Community College bought a huge mall and has converted it to an educational complex — unbelievable amounts of parking.Travis County (Austin) bought a strip shopping center and converted it to admin offices, again, huge amounts of parking.JLMwww.themusingsofthebigredca…

        1. Susan Rubinsky

          That’s awesome. They did the same thing in New Haven, CT; converted a mall and brought the community college back into downtown which helps revitalize the city.

        2. Susan Rubinsky

          I think the problem sites are strip malls in suburban areas where there’s no transit connection (depending on what part of the country you are in). Here in the Northeast, a lot of people use public transit to get to community college. Both Bridgeport and New Haven, CT, moved their community colleges back to downtown with access to train, bus and, in the case of Bridgeport, a linear trail. The public transit agencies work with the colleges to develop university bus pass programs.

    2. LE

      “adaptive reuse” = “haircut”!

      1. JLM

        .Adaptive reuse means a mill building renovated into apartments with fantastic ceiling heights and clear spans because the column spacing in a mill is usually 50-60 feet.It means a gas station adapted into a taco stand with rollup doors where the garage bays used to be.It means a grocery store adapted to become a “work” space with room for startups, small companies, and conference rooms.JLMwww.themusingsofthebigredca…

    3. markslater

      i’ve been perplexed at what happens with the malls. they are not very adaptable.

      1. JLM

        .They get bulldozed, redeveloped or converted to community colleges.JLMwww.themusingsofthebigredca…

  3. Kirsten Lambertsen

    I often think about your observations on the current trend in retail towards concept stores. It always makes me think of Urban Outfitters, where I’ll never shop again for moral reasons but I loved up until a few years ago.So, it seems like there is a great opportunity to build something big that uses the approach of selling to the entire lifestyle of a certain persona (or perhaps related/ancillary personae?).Established, entrenched industries always seem to have such a hard time seeing the future when it’s right in front of them, but the future always comes anyway. I was in the home video industry when DVD’s emerged. If we’d listened to the studios we would never have been able to envision Netflix.

    1. Gotham Gal

      it is not easy to see the future when you have golden handcuffs and things appear to be just running smoothly.

      1. JLM

        .Perhaps one of the best lessons in life is to ask yourself — “Things are going so well, what am I missing?”JLMwww.themusingsofthebigredca…

    2. Susan Rubinsky

      I was thinking about Urban Outfitters too when I hear a piece on MarketPlace about Aeropostale last evening. The brands that are closing got stale by just sticking to the same plan for years without reviewing the plan. I love how Gotham Girl referred to it as a “well thought out road map” because it implies that it’s a journey, not a static place.

      1. Kirsten Lambertsen

        Radio Shack is another one that I think of here. They had a really great relationship with a well-defined customer, and when that customer evolved, when new generations emerged, the Shack failed to keep up. They could have been such a big part of the maker movement, imho. A store manager told me that they’ve been told to focus on cell phone and cell plan sales now.

        1. LE

          I am not sure I agree with that. For one thing how big is the maker movement relative to what a retail chain that is in malls and shopping centers with high rent needs to keep on going? (As opposed to the cost of being online and being able to sell to everyone everwhere in every country?)You know it really sounds convincing to just think that an old line company somehow missed some obvious and simple way that they could expand or change their business. Maybe so. But it’s also possible that changing anything (or even experimenting) takes not only creativity but making risky changes. The changes an existing corporation (or store owner) can make is vastly different than what an investor does which is to bet on many horses knowing that if only a few work out they can make a profit.Part of what killed Radio Shack is low margins and showromining in part. (Same as with other electronics retailers). Those stores used to have a captive market in a defined area and even though there was mail order it didn’t have as great an impact on what they could sell (because there was risk in mail order and no immediate gratification like we get now with Amazon). Impossible for Radio Shack to compete with that (not enough old people driving Buicks to keep buying things from them). Plus impossible to be able to get actual knowledgable enough people to work in the stores given what they can afford to pay people (based on what they can charge for what they would sell in a small store).What’s ironic is that Amazon is killing other online retailers. Everyone knows this. I heard they were recruiting etsy sellers for a new offering that they have to compete with that.

          1. Kirsten Lambertsen

            Sure but how big was Radio Shack’s target market in the beginning? They’ve already closed stores and scaled down. Wouldn’t it make much more sense to win big with a tight customer focus? There’s no way they’re going to compete with Amazon. You’re kind of making my point 🙂 They need to reinvent and find a way to win IRL where Amazon can’t.It’s kind of hard to see how selling cell phones and cell plans is going to be the answer.

          2. Kirsten Lambertsen

            Maker covers a lot of territory, really, from electronics, to rockets, to customized drones, to cosplay, on and on.To expound a little further, imagine a Radio Shack where instructions on how to build your own robot are free, and all the parts are right there to buy, and where you can see one that’s already built in action. (“This week at Radio Shack, meet BB8 live and learn to make your own!”) Where tutorials for making your own computer are online along with links to buying all the components. There’s so much that could be done to empower, celebrate and enable the maker community. They could jump on the cosplay bandwagon (which actually involves a lot of computer stuff and electronics). If you look at YouTube, there’s a lot of evidence to support this as a sizable market that’s quite possibly under served.I think Radio Shack could have won huge with the maker and nerd market, if they’d seen the opportunity. I think the right marketing and branding and community strategy means margins can be a little bigger.

      2. Erin

        If Mexx can declare bankruptcy, it can happen to anyone. Although Mexx’s colleague, Club Monaco, started experimenting with some new ways of interacting with their customers online about 5 years ago, and they’re keeping their head above water as far as I know. My ex made fun of me for being a sucker for their branding tactics, but it worked, I feel like a million bucks in their clothes, so as long as it works, I hope they keep it up.

  4. johndodds

    A friend of mine recently set up a pop-up store that appeared to be some sort of pharmacy/pharmaceutical brand but was, in fact, an installation addressing the issues around and reality of female fertility and life choices. It was fascinating to note how many unknowing passers-by came in eager to buy stuff just because they’d seen a new store. I still can’t work out what to think about that but your post stirred the memory.

  5. Susan Rubinsky

    On TBT recently, someone I went to high school with posted a photo from those days. In it, she was holding a Bonnie & Clyde’s bag which was a local store that sold jeans, really unique clothes (think 70’s/80’s punk rock), trinkets, costume jewelry, and records when we were in high school (early 1980’s). I immediately posted, “I wish Bonnie & Clyde’s was still here!” The store was an experience of it’s own. Of course it folded when the chains took over. A revamped Bonnie & Clyde’s would certainly draw me in!

  6. pointsnfigures

    Shouldn’t they ask themselves more than just, “Internet”. Gotham Gal wrote about going to a revamped Barney’s in NYC a while ago. I think that post is telling. There has to be a reason to show up. Here I sit in my apt and need manila folders. I can order online from Amazon and get them tomorrow-or I can walk two blocks to Staples and buy them. All depends on the weather and whether I feel like being a sloth or getting out. Clothing stores are obviously different. What are they missing?Clearly, in certain cities rents are getting bad too. With all the property tax hikes and sales tax hikes in Chicago, it’s made it real tough on retailers.

    1. LE

      I have an office max and a Staples close by as well. I used to stop by to pickup things. Its annoying to shop there. Takes time and you get distracted and buy things you don’t need despite will power.It’s not fun (like going into a Whole Foods which is uplifting). It’s a buzz kill. As such I buy everything office related from Amazon and in almost all cases it’s “just in time”. End of year for tax purposes I stock up for the next year. The most annoying part? Having to get rid of the boxes and flatten them for the dumpster.What’s interesting is that there was a time I liked going to Staples/Office Max/Depot. But then again there was a time I liked to hang out at Barnes and Noble and look at books. Can’t remember the last time I did that. One reason isn’t even related to being able to buy books online. It’s because I already have tons of things I can read online that if I don’t like I can easily find something else.

      1. JLM

        .Whole Foods in the ATX is entertainment.JLMwww.themusingsofthebigredca…

      2. Lisa Mogull

        I’ve been thinking about that too. What is missing for me is the joy of discovery. That’s why I’ve started to hate shopping. Never used to walk by a bookstore without stopping in, now I walk past Barnes&Noble all the time. I’ll go into the rare independent bookstore because they might actually have something different. Otherwise I rely on reviews and just order online. Clothes and clothing stores are so boring that I rarely stop in just to browse. Eons ago when I lived in Paris suddenly some item (shoes, hat, whatever) would become trendy and you would have to hunt it down. Now (at least in NYC) it’s rare to notice someone wearing something so different, so “now” that you would search boutiques to find one. Thus small unique stores don’t get the traffic/sales they need to pay the high rents. My neighborhood (UWS) has been taken over by banks, drugstores and chain stores. Very sad for both the local shops and the local shoppers.

        1. Gotham Gal

          Very sad but it’s a cycle

        2. LE

          Part of this is that there is so much more to get distracted and entertained by. Let’s face it shopping or browsing books at B&N (or dining for that matter) is entertainment. Same reason kids don’t do stamp collecting or have a train set in their basement. They don’t need to. They have arduino and little bits. When I was a kid I had a darkroom and did photography as a hobby and some other things. Ended up being able to take photos for money. Not sure what I’d be doing with the options today but probably not that. It’s just all less interesting.As far as reading less books another reason I don’t read is that I like hearing different points of view and not just the view of the author. That is all a click away (plus you get to interact like we are doing now in many cases). And of course I need practically zero programming and computer books since it’s all online. The answer to practically any question you have. I must have 100 programming books from the late 90’s early 00’s I used to enjoy shopping for those.

          1. Lisa Mogull

            True there is a lot more to get distracted and entertained by. What I find sad is how little variety there is in stores and their stock. My neighborhood and many others have become boring and homogeneous and it isn’t fun to wander around. Part of the fun of living in a big city for me (I’ve lived in a few) has always been spending days wandering around and checking out the neighborhood. The small local stores are disappearing fast. I don’t find B&N entertaining because they lack uniqueness in style and content.To clarify, I don’t read less books than I used to. Still read about 1/week and my son has to read at least 40/year for school. We both consume massive amounts of other written media both online and print. When I need a question answered I use trusted online sources. My print dictionary isn’t in use anymore and the beloved World Books of my childhood are dinosaurs.Boys no longer swap baseball cards, instead they play video games. Little Bits are in house, but so are board games. Sadly darkrooms mostly exist as parental stories these days, but thanks to phones, kids take and share a gazillion images. More ephemeral now since I doubt they look at them again after they are posted, unlike before when we were excited to see photos when they were developed. If kids want to make money they make YouTube videos. We do have an awesome train set and legos.One of the remaining local stores in my neighborhood has a sign that says “Shop Here — Don’t Send All Local Money to Seattle.” While there are more ways to be distracted and entertained, I wish that neighborhood shops were still one of those ways.

    2. LE

      Interesting for anyone who doesn’t know this is how Stemberg got the idea for Staples:…I shopped at the Makro and remember when it opened. It was a radically different place than anything else that we had in the area at the time. Makro was located an industrial park. It’s long gone and the current tenant is a Lenox Factory Outlet

  7. Jenna Abdou

    Really enjoyed this. Thanks, Joanne. Story is playing a huge role here.

  8. jason wright

    if people want individuality they should acquire the skills needed to make things for themselves.on being a winner. you learn so much more when losing. to be a winner you first have to be a loser. be a good loser, and then be an even better winner.n.b. this has nothing to do with that Americanism i so dislike – “loser”.

  9. Pranay Srinivasan

    There is an article about Malls hollowing out because the entire fad of 2-3 large anchor stores will disappear in less than 5 years.https://sourcingjournalonli