Is the sky falling for U.S. retail?

Is it the Retail Apocalypse or simply Retail Restructuring?

There continues to be a great deal of apprehension about the retail sector. In June of 2017, Business Insider tallied more than 5,000 store closures with a projection of nearly 9,000 store closures by the end of 2017. Fourth Economy has mapped more than 1,700 of these closings across the United States. Traditional brick and mortar retail faces a fundamental challenge from shifts in consumer preferences and advances in online shopping and delivery services. The store closings are the physical manifestation of the challenges facing the retail sector, which often can leave significant redevelopment challenges for local community and economic development officials.

Despite the headlines and the hysteria, overall retail has been adding jobs. Job losses occurring over the last year may be a warning sign, but it is too early to tell. Fourth Economy created a dashboard to track three key statistics.

 

  • Overall retail employment
  • Jobs gains and losses from opening, expanding, closing and contracting
  • Worker separation and hires

 

At this point, the data on retail employment does not indicate a “Retail Apocalypse.” Over the long run, retail has been very volatile and the impact of the recession created a greater disruption than we are seeing now. What is portrayed in the media reflects a shift within retail. Over the past year there have been significant losses in general merchandise, and five other retail categories. These stores represent many of the traditional brands in brick and mortar stores.

 

Sep 2016 Sep 2017 Change
General merchandise stores 3,188,600 3,130,700 -57,900
Clothing & clothing accessories stores 1,351,800 1,321,100 -30,700
Food & beverage stores 3,096,200 3,067,400 -28,800
Electronics & appliance stores 530,200 502,100 -28,100
Sporting goods, hobby, book, & music stores 618,700 601,200 -17,500
Health & personal care stores 1,051,800 1,048,000 -3,800

 

Other categories of retail are increasing, with nonstore retailers (Amazon) leading the way. Gains have also occurred in motor vehicle and parts dealers as well as building material and garden supplies. These gains were not enough to offset the losing categories, but it shows that the retail sector should not be painted with a broad brush.

 

Sep 2016 Sep 2017 Change
Nonstore retailers 539,700 570,100 30,400
Motor vehicle and parts dealers 1,988,600 2,012,900 24,300
Building material and garden supply stores 1,279,100 1,296,600 17,500
Gasoline stations 932,400 940,500 8,100
Furniture and home furnishings stores 477,100 484,000 6,900
Miscellaneous store retailers 833,200 834,400 1,200

 

 

Even if retail is experiencing some short-term declines that portend larger losses to come, there are other segments of the service sector that are adding significant numbers of jobs. The 156,100 jobs added in food services and drinking places is nearly double the job loss in retail.

 

Sep 2016 Sep 2017 Change
Food services and drinking places 11,499,000 11,655,100 156,100
Personal and laundry services 1,458,500 1,491,700 33,200
Amusements, gambling, and recreation 1,616,200 1,635,300 19,100
Museums, historical sites, and similar institutions 161,500 168,600 7,100
Repair and maintenance 1,288,000 1,292,400 4,400
Accommodation 1,950,200 1,954,000 3,800
Performing arts and spectator sports 457,500 459,700 2,200

 

The dire forecasts are overblown. Consumers are shifting from commodities to experiences and many analysts say that retail’s future is to provide more than merchandise. This is as much about where the service is provided as how it is provided. Neighborhood level (Main Street) retail also appears to be adapting to these trends. People looking for and returning to walkable communities has helped, but so has the ability of “Mom and Pop” stores to differentiate through service and quality rather than low prices. The emphasis on more services, entertainment and food has also helped Main Street retail. Recent data on the performance of small retailers is not available at this time,  so it is not possible to fully evaluate these trends but it appears that the dominance of big box and superstore retailers is being challenged on two fronts – online and on Main Street.

 

FEC Index Spotlight: Talking Housing Affordability and Tourism with Vail Valley Partnership

Fourth Economy Community Index #6 Midsized Community Eagle County, CO

We talked with Chris Romer, President and CEO of Vail Valley Partnership, when Eagle County, CO came up as the #6 mid-sized community on the Fourth Economy Community Index this year. At that time, Romer largely agreed with what we reported seeing in the data, but he had one bone to pick with our metrics. Yes, Romer could see how Eagle County received high scores in Talent, Investment, and Place, and he shared how environmental sustainability was crucial given the local economy’s reliance on outdoor recreation (you can read more on this here). But he couldn’t see how Eagle County could land on a list that takes housing affordability into account given how serious an issue it had become in the area.

Like our home city of Pittsburgh, Vail Valley appears to be “affordable” in terms of housing and transportation costs when viewed at a macro level compared with median household incomes. But also like Pittsburgh, data taken at a macro level can be deceiving. Back in July, Romer shared with us that housing affordability was front-of-mind for his organizations and partners in the area. Since then, we have noticed that even during the busy tourist season, the Eagle County Housing Task Force remains active in engaging the community to find solutions.

We caught up with Chris Romer in December to learn more about the Task Force and get his take on the connection between housing affordability and a strong local economy. Romer shared that his organization is supportive of initiatives driven by the community at large and by business owners, and lends a hand whenever possible to help advance efforts like the Housing Task Force.

“As a resort-oriented community,” he said, “Our challenge is that we have international demand for our real estate.” He went on to share that Vail Valley is unique because when someone goes to buy or sell a house in a place like Cincinnati, OH, where Romer grew up, most people are moving for a job or moving from somewhere nearby. By contrast, much of the residential real estate market in Eagle County, CO is made up of second homes or vacation homes. “That is exasperated by the fact that we are surrounded by public land, so we have 15% on which we can build.” Because of the recreational assets and the investment opportunity, this means a lot of competition for housing, says Romer.

When asked what he thought about the need for housing that is attainable for people working in the local tourism sector, Romer reported that tourism makes up about 48% of the local economy and that while local jobs in tourism, recreation, and hospitality pay about 60% above average for the state in those sectors, they are still lower paying jobs in many regards. Therefore, Romer said, “It does exasperate the challenge in terms of affordability.”

We wrapped up our conversation with Romer by asking what, in addition to the Housing Task Force, he would share with other economic developers on the topic. “We are very actively engaged with advocacy and working with elected officials to reduce regulatory burdens,” he said. “And we are working to educate the community on ways that we can impact and incentivize developers to include attainable and affordable housing.”

At Fourth Economy, we’ll be anxious to see what comes next for Eagle County in terms of housing affordability, and we want to hear your thoughts on Vail Valley’s approach. Strategies like this one, that pair smart economic development decisions with a long-term point of view, are what build the strong communities and economies that the Fourth Economy Community Index seeks to capture. You can subscribe to Vail Valley Partnership’s newsletter and follow them on social media by visiting www.vailvalleypartnership.com.

 

We’re hiring!

We’re looking for an innovative and creative professional with experience and expertise in graphic design, brand management, business development, and web design. Fourth Economy is hiring a Graphic Design and Communications Manager to help us communicate our plans and recommendations to our clients and the stakeholders they serve.

Send cover letter and resume and work samples that demonstrate your design approach and capabilities to pia.bernardini@fourtheconomy.com.

The Four Keys to Effective Collaborations

The Fourth Economy team strongly believes in the power of partnerships in improving community and economic development outcomes. Through our work, we have managed numerous collaborations and identified four keys that lead to effective partnerships.

Patience, Participation, and Partnership

Effective collaboration can be difficult and often takes time. Therefore, it requires that all stakeholders have patience throughout the process of building partnerships and developing solutions. As partnership groups face challenging times, it is critical that they overcome these difficulties together and remain engaged in the effort. One difficulty that may arise is that as individuals and organizations collaborate to further a common purpose, they are typically guided by their own self-interest. These motivations are not always negative and can often support the success of collaborative groups when they are aligned with the goals of the larger partnership. In addition to acknowledging these self-interests, during initial conversations, these groups should identify outcomes and boundaries to focus their work. The group should allow for some flexibility in these areas as issues can change, but too much flexibility will impede the group’s ability to effect change and could cause stakeholders to leave the group. Continue reading “The Four Keys to Effective Collaborations”

Fourth Economy’s Rich Overmoyer and Chelsea Burket Appear on “Our Region’s Business”

Fourth Economy CEO Rich Overmoyer, along with Director, Sustainable Communities, Chelsea Burket were recent guests on “Our Region’s Business” hosted by Bill Flanagan. They discussed Fourth Economy’s role as a platform partner for the Rockefeller Foundation 100 Resilient Cities initiative. Watch their appearance by clicking on the video below.

Dr. Jerry Paytas on the Fourth Economy

Our own Jerry Paytas appeared on the Sunday Business Page recently where he was interviewed by KDKA’s Rick Dayton. Dr. Paytas explained the origin of the Fourth Economy name and provided a brief overview of our philosophy for effective economic and community development. Click here or on the image below to watch the complete interview.

paytas-kdka

Fourth Economy’s Jerry Paytas Appears on “Workforce Central” Podcast

I recently had the opportunity to appear on the Workforce Central podcast, where I discussed the current state of the economy, trends that workforce boards should be aware of, and my thoughts about the impact of the upcoming election on the overall U.S. economy. Workforce Central is the official podcast of the National Association of Workforce Boards.  The podcast is hosted by Ron Painter, President of the NAWB.

It’s Time to Face the Facts about Our Public Spaces

reese-092016We know how important quality of place can be in building better communities and stronger economies. But with something so subjective, how do we know when we are getting it right? And if we value inclusive growth, how can we be sure that quality of place can be shared?

As Commissioner of Philadelphia Parks and Recreation Kathryn Ott Lovell observes, “civic commons” in changing neighborhoods can be “platforms for economic and social integration” – a perspective she encourages as part of the now-national Reimagining the Civic Commons initiative. Continue reading “It’s Time to Face the Facts about Our Public Spaces”

6 Years of Equipping Change Agents

overmoyer092016Recognition: rekəɡˈniSH(ə)n/, noun, the action or process of recognizing or being recognized.

Fourth Economy has now turned six! Thanks to you, we’ve had a chance to put our ideas to work and make an impact – and people are noticing.

You may hear this week about our national recognition for being an Inner City 100 company (#53) as determined by the Initiative for a Competitive Inner City. We are big fans of the organization, which has been championing strategies to rebuild our most vital communities. Hanging out with them for two days and taking home a plaque commemorating our achievement was pretty awesome! Continue reading “6 Years of Equipping Change Agents”