Economic Development

Retail Industry In Region Is Down but Not Out

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YOUNGSTOWN, Ohio – One needs only to drive along the major commercial thoroughfares in the Mahoning and Shenango valleys to see firsthand how the landscape of retail is changing.

Big-box stores along U.S. Route 224 in Boardman sit empty and other major retail chains have announced plans to close their storefronts across the region and the United States. Meanwhile, some of the area’s malls have been stripped of their anchor stores, leaving many wondering what the retail industry will look like in five years.

“It’s not a rosy picture,” says Dan Schiavone as he looks out across a 10-acre lot filled with rubble where last year a large Kmart store had stood 48 years. The retailer closed the store in April 2016 and demolition of the 105,000-square-foot building started this spring.

Schiavone, leasing agent for the property, expresses confidence that the site will be redeveloped. “We still plan to keep it retail,” he says, simply because of the site’s prime location near the intersection of South Avenue. Whether the tenants will include a large retailer remains to be seen. “The big-box days appear to be over for a while at least,” he remarks.

Nevertheless, Schiavone says the site is attracting interest, but it could take several years before it’s fully developed again. “There’s a lot of interest,” he says, “and we feel we have one of the best locations.”

Kmart and its parent, Sears, are among the casualties of consumer buying trends that are increasingly gravitating to online shopping, industry observers say. Earlier this year, Macy’s and Sears closed their stores at the Shenango Valley Mall in Hermitage, Pa.

In the Southland Crossings Plaza in Boardman, the office supply giant Staples shut its doors in July. Placards affixed to the windows at Staples thank customers for their support and direct them to the chain’s online shopping site or its Niles store.

The local retail closings are a symptom of a trend that affects the entire country as department stores, electronics retailers and appliance stores reduce their physical footprint across the United States.

This year, for example, Radio Shack announced it would close 1,430 stores – two of them in the Mahoning Valley – while electronics and appliance retailer hhgregg announced it would close all of its 220 stores nationwide – one of which was in Boardman.

In all, 24 major retailers – including familiar names such as J.C. Penney, Macy’s, Payless and The Limited – have announced a total of more than 5,000 store closings across the country, lending many to dub this the era of the “retail apocalypse.”

Not so, Schiavone observes, saying these terms tend toward hype and distort the state of today’s retail industry. “It’s not devastating, but it is cause for concern,” he says. “And, I don’t know if our area has been hit as bad.”

The hhgregg space, for example, has interested tenants just three months after the store closed, reports Bill Kutlick, broker at Kutlick Realty LLC. “We have a letter of intent on that property,” he reports. “There have been some vacancies, but there’s been some strong activity.”

Boardman’s retail corridor remains very appealing, Kutlick relates, and properties such as hhgregg and the former Kmart site should command strong interest because of their location. “It’s still all about location,” he says.

Moreover, the theory that online shopping has decimated the retail industry just doesn’t hold up, others contend.

“Ninety-one percent of all retail sales are done through brick-and-mortar stores,” reports Gordon Gough, CEO of the Ohio Council of Retail Merchants. “Groceries, general merchandise, jewelry – they’re doing OK.”

There’s no doubt that the retail industry is undergoing a change, which is not uncommon in the business, Gough says. “It’s a transitional time. Thirty or 40 years ago, every town had a department store, and then the big-box stores came in, and now there’s this fear of e-commerce,” he says.

A sale conducted online, Gough notes, is still a retail transaction. And, while a shuttered retail big-box results in the loss of jobs, advances in e-commerce have created positions in warehousing and distribution and information technology.

“You’re seeing changes happening very quickly, so our members have to be innovative as well,” he says. “It’s going to change just like other business sectors.”

The Ohio Council of Retail Merchants represents 7,000 retailers across the state, Gough says, large and small. The majority of these retailers, 98%, employ fewer than 20 people, he says.

“Consumers want to be served by people they know,” he says.

There’s little doubt that the retail industry is undergoing dramatic changes, acknowledges Joe Bell, spokesman for The Cafaro Co. in Niles. “The industry is in flux, but it’s not unprecedented,” he says. “Retail has had these cycles for many years. Remember Woolworth’s and Montgomery Ward?”

The Cafaro Co., among the country’s largest commercial retail developers, owns the Eastwood Mall Complex in Niles.

The explanation that online shopping has led to the closings of larger retails is simplistic, Bell says, noting many other factors are at work. “One of the things I hear constantly is that online shopping has killed the retail sector,“ he says. “That’s vastly overstated.”

Often, the reasons for large chains abandoning their outlets is because of heavy debt that forces a bankruptcy or acquisition by a venture capital firm, Bell says. Other retailers simply want to revamp their business model and reduce operating costs.

Just 8.5% of retail shopping was done online last year, Bell says, evidence that there is still substantial demand for physical retail space.

“We want to make sure the stores based here serve our customers and serve them well,” he remarks. “We want to make sure our tenants are a good fit. The American mall is changing with the needs of American consumers.”

Still, other malls in the region have been hit hard. Jim Sarvas, a commercial real estate agent for Northwood Realty Services, is the Shenango Valley Mall’s leasing agent. “There’s not a lot of retail stores looking for space nationwide right now,” he says.

That means investors or stakeholders must become creative about how to redevelop retail centers, he observes. And big retailers might not factor into those plans.

“We’re looking at anything,” Sarvas says. “We need some investors with unique ideas.”

The real estate agent relates that underused malls in other parts of the country have filled empty retail space with family-oriented entertainment venues such as hockey rinks, condominiums, bowling alleys – even libraries.

“Marketing something like this takes awhile,”Sarvis says. “We’re also talking to retailers.”

The latest statistics show that employment in the retail sector across Ohio has fallen over the past year.

In May 2016, for example, the Buckeye State employed 575,000 in the retail industry, according to the U.S. Department of Labor’s Bureau of Labor Statistics. In May 2017, that number dropped to 568,200, a loss of 6,800 jobs and a decline of 1.2%.

Employment in some areas of retail did increase across Ohio, data show. General merchandise retailers employed 118,100 in May 2017, a gain of just more than 1,000 jobs versus the same period last year. Clothing and clothing accessories stores also posted employment gains.

That trend appears to be holding in the Mahoning and Shenango Valley markets, according to BLS data. Retailers in the Youngstown-Warren-Boardman metropolitan statistical area – which includes Mercer County, Pa. – employed 29,900 people in May 2017, unchanged from a year ago.

Meanwhile, employment among general merchandise stores in the region increased substantially, data show. These retailers employed 6,200 in May 2017, up from 5,900 in May 2016, or an increase of 5.1%.

“There still appears to be some demand in retail,” observes Bert Cene, director of the Ohio Means Jobs Workforce Development Board of Mahoning County.

Cene says some of the larger retail chains don’t notify them of the pending closing of a store while others seek information to give to employees so they can be retrained or obtain help securing other employment.

“Some of these retailers will close overnight,” he says. Others, such as hhgregg, contacted the agency to obtain the necessary information to provide their employees so they could seek other work.

In the case of a plant closing or store closing, Cene says his agency can deploy a “rapid response” team to help those employees about to be displaced. After that, former employees can come to the Ohio Means Jobs sites on their own volition or apply for positions without the help of the agency.

He says it’s hard to determine just how many of those who use its services were downsized from retail positions.

“If we can get involved sooner, they can get prepared for unemployment or even re-employment before they’re laid off,” he says.

Published by The Business Journal, Youngstown, Ohio.