11 August 2012

The coming collapse of 'Big Box' and department stores and their urban impact (draft)

(Image found on Business News Daily blog entry. See: http://www.businessnewsdaily.com/2347-big-box-hate-groups.html )
In the latest news, Best Buy is having financial troubles.  The founder and former CEO, Richard Schulze, is attempting to make the company private (see http://money.msn.com/business-news/article.aspx?feed=OBR&date=20120806&id=15416609 .) There is the usual backroom stuff and static. However, this is not an isolated case.

The bottom line is that Best Buy and other Big Box and traditional department stores are out of touch with their customers, have unknowledgeable and even rude employees , have over priced goods and are being used as a ‘showroom’—meaning customers are going to look at products and then buying for less elsewhere, probably on the Internet.  
If you look at the recent past, we have seen giants such as Kmart being absorbed by Sears, then Sears having problems.  Montgomery Ward bit the dust several years ago.  Borders and Circuit City are no more.  J.C. Penny’s is not weathering the storm very well either.  Wal-Mart is not fading, but not exactly growing either. In recent years, most of their profits were made overseas and they were willing to bribe government officials in Mexico, of which they are now paying a hefty fine. These companies are trying refinancing, different marketing techniques, such as using social media etc., but structural forces are working against them such that in a very short time, many Big Box stores will be soon cease to exist. 

What are the causes of the future collapse of some of these Big Box and department stores?  My initial reading on this is that:
1. The Internet oriented companies can offer better prices due to low overhead and ease of use.  Online retailers such as Amazon.com, do not have to worry about building stores, hiring employees on a local basis and transportation of goods to individual stores.  With poor service being offered there is no need to go to Big Box/department stores.  
2. With the stagnating economy, those with middle incomes, cannot afford the merchandize being offered and are going toward alternative measures such as thrift stores , discount stores, garage sales and informal online selling vehicles (i.e., e-bay, craigslist, local internet bulletin boards etc.) In addition, many in the middle income are now wary of using credit cards due to their precarious situation.
The Urban Impact
The outcome of this is not good for local economies. The employees of these Big Box stores will be laid off (many of these stores are doing this already.)  There will be empty stores in local cities and barren locations that once were occupied by the stores.   The local retail market since it has been devastated by these stores will not be able to offer the same goods at these prices. Local taxes will decrease because these stores will not pay property taxes and the former employees will not be paying taxes or very little. These will not help the struggling retail sector, as these people will be either be: unemployed,  in low paying jobs or in school for retraining (if they are fortunate.)  Other connected industries such as trucking, supply companies, and manufacturing will also be affected.  This will cause additional stress to the local labor market and add to unemployment/under-employment and decrease purchasing power for many.

What can urban areas do?
Responsible local decision-makers (elected and non-elected) can bemoan the fate of the Big Box and its impact or can be pro-active.   Urban planners, by the very nature of their profession, are charged to research and make opportunities from a seemingly dire situation. 
There would seem to be a number of measures that could be undertaken to initiate this situation:
1. Initiate a public-private dialog on a regional level via governmental bodies such as Metropolitan Planning Organizations, Council of Governments, planning commissions, Chamber of Commerce etc.

2. Establish a regional task force with the specific charge of looking at alternatives before the Big Box stores have exited.  This regional task force should not be seen as a advisory group, but one that is committed through various measures to bring about a solution.  This can be a networked group that includes all that want to participate, particularly citizens.  There can also be a social media component to it.
3. Before the task force is started, the urban planners being drawn from multiple organizations need to establish an initial structure and dynamics to the process.
4. Once the process is initiated, it should not be considered a ‘window dressing’ group, but one that considers all options from all segments of the region  No option should be over-looked or considered ‘too wild.’

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