Part 2: Aftershock
Again, like I said, because you weren’t listening the first time, this isn’t because of coronavirus or covid-19 or whatever the fuck you want to call it. I got too lazy when I started this mini series and didn’t finish writing it whatever deal with it. Anyways, Macys is closing stores and a lot of them. What does this mean? Well, it seems pretty straightforward but basically Macy’s needs to close a shit ton of stores because they’ve been hemorrhaging cash as consumers visit malls less and the dominance of e-commerce retailers like Amazon take over.
Pretty bleak right? Let’s break this down.
Massive brick and mortar stores like Macy’s form the backbone of retail and lay the foundation for shopping malls across the country. As these retailers collapse or just close locations -so do the malls themselves. When an “anchor tenant” retailer like Macy’s chooses to close this creates a domino effect where overall traffic inside the mall itself slows and so does purchasing at other retailers within the mall.
For example, when a traditional anchor tenant, say Macy’s or Sears or JCPenny’s closes it doors, that drives down foot traffic and hits traditional mid-sized retailers in malls. These are your Abercrombie, Victoria’s Secret, or Pottery Barn. Once this shock is felt, their corporate decision-makers make the strategic choice to not renew their lease with the mall or simply pick up and leave altogether but continue to pay rent (this is called a “go-dark clause” which allows the retailer to vacate the store as long as it continues to pay for the space).
Now what? You lost Macy’s, Sears is long gone, and now your mid-sized retailers are packing their bags and heading for the exits. The bleeding doesn’t stop as foot traffic slows even further and smaller franchise retailers begin to walk away. These are your Bed, Bath, and Beyond, Claire’s, and Foot Locker. As these guys walk, you guessed it, foot traffic slows or even comes to a screeching halt. What happens is these name brand retailers eventually all leave and what you have left is a collection of independent, non-chain retailers selling things like sports memorabilia. A lot of times the malls are so desperate for cash they just start renting out former retailer’s space for a karate studio or to some struggling artist who needed a cheap space to sell their garbage paintings.
Now minus the karate studio and Liberty Tax, the malls are basically vacant. The mall might have a movie theater which can bring in some cash, but with Netflix and Hulu, and every other subscription service, movie chains like AMC and Regal are even feeling the hit. In the end this brings in no revenue to the mall, the mall cant pay its property taxes (much less make a profit), and forces them to go into bankruptcy. When you lose that tax money, school districts, towns, cities, and even the county altogether need to adjust their budgets to spend less or cut spending altogether.
This happened to a small mall in my hometown call ShoppingTown. Economically sound suburb so it wasn’t that bad and we have Destiny USA around the corner which is the size of a small city and actually ending up engulfing all the retail from STown as we liked to call it (no one called it that). But losing it sucked because now we have this massive eyesore in the center of town that could be used for anything but that fucking abandoned mall that me and my grunge friends used to skateboard to to play the free video game trials at Gamestop for hours and then leave after not buying anything.
Did I bring you down? Do you feel like life is over? Good, get the fuck off your couch, swap your sweats for some pants, swipe out of Instagram, get off your phone, exit out of Amazon and go shop somewhere.