Filling in the Gaps

An earlier post discussed the tremendous glut of retail selling space relative to customer demand.  Recapping that discussion; after decades of adding retail selling space faster than the population was growing, there is now over 46 square feet of selling space for every man, woman, and child in America.  This compares to an equivalent of about 2.5 feet/person in Europe.

Inevitably, this imbalance must return to equilibrium and it has begun to do just that.  Over the last few years, several major retailers have closed, including Linens n' Things, Circuit City, Mervyns, and Hollywood Video to name a few.  Others are filing Chapter 11, closing stores, and reorganizing.  Entire regional malls are closing and strip malls and downtown shopping centers everywhere are beginning to look like a mouthful of missing teeth, even with rents going for 20-30% less than they were 2 years ago.

So the really big question is - What's going to happen to all this vacant space?

An article today in the Wall Street Journal gives one alternative - for-profit colleges.  The University of Phoenix has added over 120 properties to its training and education portfolio over the last three years, bringing their total to over 200 locations in 39 states.  These locations focus on providing skills to out-of-work adults in areas like health-care, automotive, and technical trades.

There's also demographics to consider.  There are over 70 Million baby boomers who are now entering retirement age.  This spike of aging in the population is surely going to require more health care, assisted living facilities, and who knows what else.

How about good old American entrepreneurship?  One recent phenomenom is the growth of pop-up stores, which can be seasonal or marketing introductions.

But these are just the obvious ones.  What other possibilities do you see?  Nature abhors a vacuum and while a lot of this real estate will simply be torn down, most of it will be turned into something else.  But what?  What do you think?

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StrategyThe Big Shrink There is too much retail selling space chasing too little sales demand.  This space requires working capital (inventory), payroll expense to cover the space, and drives excessive markdowns to clear the inventory.  Most national chains have anywhere from 10-30% of their locations operating at a net loss.  Here are some examples of retailers facing the situation and taking steps to address it.  Read More The Big Opportunity Estas listo? Retailers, more than most, tend to focus on next week, next month, and, on rare occasion, next season.  This is the nature of the business.  The risk, however, is that major shifts in the retail environment can happen unnoticed and major opportunities can go by uncaptured.  There is such a shift underway today and most retailers are not focused on it in a thoughtful, tangible way.  That shift is the rapidly growing importance of the Latino population on the retail marketplace. Estas listo?  Read More Rebirth for the Big Box? Earlier posts here have discussed the glut of retail selling space in America.  The big box stores in particular, with their cavernous space, large inventories, and associate headcount are particularly stressed as they adjust to the "new normal" of lower aggregate demand caused by chronically high unemployment and the ongoing reduction in consumer debt loads.  As I've asked before - what's going to happen to all this space?  Read More Filling in the Gaps For three decades, retail selling square footage grew much faster than the population.  The financial collapse of 2008 brought about a sharp reduction in consumer spending, which brought this extraordinary imbalance into stark relief.  Returning to a supply/demand equilibrium brought on a wave of retail closings that produced huge amounts of empty retail space at very attractive prices. What's going to fill this space?   Read More What Localization Means Many major retailers are in the midst of or have already launched initiatives to "localize" assortments.  What, exactly, does localization mean and what are the key elements to success?  Read More Welcome to the Ghost Town Mall - the future of 4-wall retail Driven by cheap credit, retail selling space has grown at a 4-6X multiple of population growth.  This imbalance was masked by the explosive equivalent growth of consumer debt and a precipitous drop in household savings, which went from 12% of income in the 1970s to -1% of income in the mid 2000s. The financial collapse of 2008, among other things, brought this retail selling space/population imbalance into stark relief.  There is now 46 square feet of retail selling space for every man, woman, and child in America, a figure over 20 times the equivalent in Europe. What does this mean for the future of 4-wall retailing in America?  Read More Riding the Gen Y Wave The Gen Y population is 110 million.  This is almost 50% larger than the Baby Boomer generation.  Their average age is 20.  As they age into their acquisitive years, they will change retailing in America. What should retailers and category managers consider as they prepare for this coming change?   Read More What's Next The "Roaring Zeros" have drawn to a close with most retailers and customers muttering "Good Riddance".  It was a decade with extraordinary ups and downs that ended on a clearly down note.  So what happened and what's next?  Read More The Disappearing Boomers The Baby Boomers, defined as those born between 1946 and 1964, are getting older, entering retirement age, and preparing to live on Social Security and investments.  They are already spending less.  This is the largest single population bloc, representing 36% of the adult population.  Their spending cannot be replaced by the generation behind them, which is a third smaller in size.  What should retailers and product manufacturers be looking at to prepare for the implications of this trend?  Read More