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Post by MacBeth on Jan 23, 2009 6:12:47 GMT -5
by Tom Van Riper Wednesday, January 21, 2009 While industry executives and shoppers will remember 2008 as the year the party ended, figure 2009 to be the year of the hangover. Already, Circuit City, Linens 'N Things and Mervyn's stores are going away. Sharper Image is too, though the company will continue to sell some of its high-end gadgets through license agreements with other retailers. More pain is on the way. One-third of U.S. women recently surveyed by America's Research Group said they plan no clothing purchases--none--in 2009. Normally, it's just 4%. That means the market is still far too saturated with stores. Expect closings and bankruptcies to rattle the likes of Lane Bryant, Gap, and Starbucks. It's the inevitable counterpunch to the days of retailers fighting hand over fist for market share during an era of loose credit and minuscule interest rates. Those days are over, probably for a long time. While accelerating unemployment will only last so long, consumers' debt loads and credit access don't figure to recover to pre-party levels for quite awhile. "I don't think we will live the same way for 10 years," says Howard Davidowitz, chairman of New York-based retail consultant and investment bank Davidowitz & Associates. "People are so scared they're starting to save." Retailers at risk in 2009, he thinks, include outerwear specialist Eddie Bauer and teen-apparel-seller Pacific Sunwear, along with Zales, the big jewelry chain. All three shuttered at least 8% of their U.S. stores last year, with many more closings expected. The same is largely true of Charming Shoppes, the owner of Lane Bryant, which closed 150 stores last year. With a mountain of debt and losses totaling over $260 million over the most recent 12-month reporting period, the company will close another 100 locations this year. Another possible casualty: Sears Holdings, operator of Sears and Kmart stores. A key to hedge fund manager Eddie Lampert's 2005 merger of the two chains was in the underlying real estate. But with those values down 30% or so since then, slumping sales hit even worse. "I'd be surprised if Sears-Kmart makes it through the year," says Britt Beemer, who runs retail market-research firm America's Research Group. Non-apparel specialists like Starbucks and Sprint Nextel won't be going away, but they will close hundreds more stores during the coming year, Davidowitz predicts. Narrow specialties (Sprint's cellphones) and high prices (Starbucks' coffee) are tough sells as the consumer mood turns thrifty. What plagues Starbucks will also affect other upscale goody chains like Mrs. Fields' Cookies, and causal dining outlets like Applebee's and Cheesecake Factory. Any of the neighborhood outlets for those restaurant chains could be a casualty this year. For too many customers now, it's McDonald's or bust. Davidowitz doesn't think a huge government stimulus will help. Better to let things bottom out naturally before regrouping. "Obama's plan will make it worse," he says. "We got into this by borrowing and stimulating, now he wants to borrow and stimulate more." Charming Shoppes (owner of Lane Bryant, Fashion Bug, Catherines) Specialty: Women's apparel 2008 closings: 150 (6% of total) Outlook: Lots of debt, performance is terrible (losses of over $260 million for the 12 months ended in November 2008). The company already said it will close at least 100 more stores this year. Who knows if it can survive? Eddie Bauer Specialty: Outerwear 2008 closings: 29 (8% of total) Outlook: The specialty retailer catering to 30- to 54-year-olds is on the critical list as losses mount and shares trade at 50 cents. Ultimately unlikely to make it. TimberlandSpecialty: Outdoor Apparel 2008 closings: 40 (16% of total) Outlook: Not on the critical list, but expect significantly more closings. The footwear company is still sponsoring this year's Sundance Film Festival. Ann Taylor Specialty: Women's apparel 2008 closings: 60 (6% of total) Outlook: After 180 layoffs, the women's clothing chain announced an additional 57 store closings over the next two years. Relatively healthier than other struggling retailers, but figures to shrink further. Zales/Piercing Pagoda Specialty: Jewelry 2008 closings: 105 (12% of total) Outlook: Absolutely in free fall, more closings for sure. Zales may not make it. finance.yahoo.com/family-home/article/106466/Where-You-Won't-Shop-in-2009
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Post by crazielollie on Jan 25, 2009 3:44:16 GMT -5
Is this the end of "mall life"? Not so sure others won't be affected. Do people really go on spending for cell phones (other than those who use cells only) and blackberries when they aren't working? Will they continue to shell out for cable and satellite? A lot of the "low paying retail jobs" were "second jobs" in many families and payed for "extras" that won't be in the budget once those jobs are gone.
This fellow has a brighter outlook than I. Actually, I expect even Wal-Mart and Target will be closing some stores. Job loss definitely takes a cut into spendable income even when it comes to necessities like food. For every politician who has decided "the jobs are never coming back", I say, start praying that someone finds a way to do just that because it's the only answer. Consuming without producing, the service economy - well, it just doesn't work. Snake eating it's own tail. We're living the end result of that kind of thinking. Poverty is about to become reality for more people than we dreamed possible. It's not the saving that's hurting the retail economy - it's the lack of spending by those who were spending money they didn't have for things they really didn't need. Games over!
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wheelspinner
Are We There Yet? Member
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Post by wheelspinner on Jan 25, 2009 6:11:15 GMT -5
It does seem that the pain is being felt in the retail sector, more so than in the banking sector where you'd think the fallout would be centred. I guess this is due to the collapse in consumer confidence.
Locally we have similar stories. Herringbone, a high-end clothing manufacturer and retailer, is in voluntary administration and will likely go to the wall in a couple of months. I'm also hearing that a major auto parts dealership called Repco is in serious financial trouble.
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Post by MacBeth on Jan 25, 2009 8:10:51 GMT -5
No cable will mean no TV, lollie. I suspect people will continue to pay for that.
And like JC Penney did when it spread at the beginning of the 1900s, WalMart and Target will remain standing when solo stores and smaller chains are gone. Nothing is really new. We just keep forgetting the lessons learned.
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Post by wayneinfl on Jan 25, 2009 10:03:03 GMT -5
I dropped cable. Dish, actually.
There are some businesses that just shouldn't be in business. They're not well run or there are too many of them in the market, or whatever. These downturns are actually a good thing as it helps weed out many of the less competitive, more wasteful businesses.
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Calluna
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Post by Calluna on Jan 25, 2009 12:25:36 GMT -5
No cable doesn't mean no TV. That's what those rabbit ears are for. Of course, cable is still operated as local monopolies, somewhat the way Bell/AT&T used to operate before it got split up and other competitors were allowed in the same market area. As long as cable has monopolies, they can keep getting away with charging an arm and a leg for less and less service, forcing you to upgrade packages for more money to keep the channels you're used to. So, when they can charge far more than the service they sell is really worth in a competitive market, they'll stay in business.
As for a lot of those other stores, I'm not surprised to see them failing. They priced themselves right out of their own market. Did anyone ever buy stuff at Sharper Image? I know lots of people who would walk into their stores and play with the gadgets and toys in the store (or test out the massage chairs), but I don't know anybody who ever thought any of that was worth the price they were charging for it and actually bought anything.
Linens n' things was a good store WAY back when they mostly sold linens and just a few little "things" to complement those. You used to be pretty sure that if you needed a new set of sheets or a shower curtain or comforter or towels that if you went to their store, you'd find something in a color and style that suited your taste. When they started to become a lot more "n' things" than linens, I stopped shopping at their stores. We don't have a local store for them, and I don't miss them at all.
And Starbucks, ha. They've always been overpriced, but as their chain has grown, the coffee has gotten worse and the prices have gotten ridiculous. With so many competitors now offering "premium" coffee at more reasonable prices, they can't sustain themselves.
Actually, looking at that list, that's what's going on with all those stores. They're all stores I consider overpriced for their quality. I do like some of the clothes sold in Ann Taylor stores, but I NEVER buy them full price. When they have clearance sales, then I'll go in and consider buying something.
I've heard of Mervyn's, but thought they were already out of business years ago, back when the economy was otherwise still booming.
The other thing that Starbucks especially highlights is that they got to the point where they were competing with themselves. It was crazy. This was especially obvious when I visited Chicago a couple years ago. It started to be the running joke...walk out of a Starbucks and say, "Wow, I really could use a cup of coffee" then look across the street and say, "Good thing there's a Starbucks just across the street." There seemed to be one on every block or every other block. How many of the same franchise can you sustain in one neighborhood, town or city before they all fail?
Heck, near where my boyfriend lives in NYC, there are two grocery stores of the same chain literally two blocks apart (short blocks). We really can't understand that logic yet. You have to cross the West Side Highway to get to any grocery store, because there are none over by where his building is, but then once across, there's two within two blocks. The one further from him always has fresher produce and meats too, so why would anyone shop at the other when you could walk two more blocks and get better quality foods? Why would a chain compete with itself? Maybe if they were 5 or 6 blocks apart, I'd get it, people there walk to the grocery stores and 5 or 6 blocks is a lot of distance extra to walk, but two blocks is nothing, even when I'm walking all the way from the other side of the West Side Highway. Maybe there is enough business to sustain those two stores so close together when it's something like groceries. But, for something like Starbucks, I think someone needs to look at the density of franchises.
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Post by wayneinfl on Jan 25, 2009 12:39:54 GMT -5
Talking about all these mall stores- I looked at Hollister's in the mall. They have the name on the stoop at the entrance. No big sign across the top.
Starbuck's- I can see why they might do well with one coffee shop across the street from another- in an urban area. If someone is walking it can be a pain to cross the street. If Bob's coffee stand were to open up across the street Starbuck's would lose half their business. I don't drink coffee myself, but I have noticed that the people who work in the north end of our mall will go to Haagen Dazs for coffee rather than walking to the south end to Starbucks and the rest of the food court.
And I think the trend for more coffee shops would be even greater in some place like Chicago. It gets cold there. Starbuck's originated in Seattle and there's a reason. It's always cold and raining. Even I visited coffee shops when I was working in Seattle. And sure enough there's one on every block. I swear- you can stand on any corner in Seattle and there's a coffee stand. If you want coffee anywhere anytime, there's someone to sell you a cup.
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Post by MacBeth on Jan 25, 2009 14:25:55 GMT -5
Actually, no cable means no TV unless you have the converter and antennae and live in an area where they will pick up anything that way. And much of the US will be in that position after 2/19
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Post by crazielollie on Jan 25, 2009 15:06:26 GMT -5
Beth's immediate response tells me life is going to be very difficult for some. Yes, I enjoy the heck out of satellite but know it's not a necessity. We couldn't get cable here and could only bring in a couple fuzzy stations with an antenna (they might be clear depending on the weather). Dish was a boon but not one we got into until the kids purchased a set-up and some months of service for us one Christmas. We lived without it before and can again especially when it comes to weighing the cost of it against how many groceries it will buy. Actually, my daughter doesn't have it and the TV watching the kids do are videos (adults too). They watched House on videos borrowed at the library so the adults get to see their programs as well as the kids with no cost other than electricity. For anything "special", they come here. She gets the news on the radio as does hubby his sports programs. I can remember not having a TV as a child. The fellows went to the one neighbor who did have one for the friday night fights and to listen to anything that was deemed of "national importance" politically (the ladies went for those viewings too along with the kids and it usually ended up as a pot luck dinner and lots of fun for the kids). We also lived without one the first 5 years we were married. Did a lot more reading then. Also, the idea that "everyone is on the net" is a false one. Know tons of people, even young ones, who don't use it at all in this area and I'd bet it's the same in a lot of inner city neighborhoods.
Starbucks is a middle class thing - you know, the class we're losing. There still are a whole lot of working people carrying a thermos and a lunch box.
People really can live without going to a restaurant (even McDonalds) on a regular basis. Places like Applebees and several others are easily affordable for us but then there are only the two of us - feeding a whole family gets a lot more expensive. We didn't have all the chain restaurants when the kids were growing up here and going "out to eat" was a treat reserved for special occasions. (pretty much like it was in the neighborhood I grew up in - one of the pulls to this area was the fact that it was 30 years behind the times).
Life has become so full of "imagined necessities". Cell phones aren't necessary and actually, it's possible to live without any kind of phone. I still bless the day we got a private phone here after having to live 10 years with a 4 party line. Made life better but when one is down and out, eating makes life better. People are capable of managing their schedules with a pen and paper and figuring out their budgets the same way. Gadgets are fun but hardly necessary.
We could even go down to being a "one vehicle family". It would be much less convenient but we live that way for years and it's not really a HUGE sacrifice.
There are so many things that have been taken for granted over the last 20 years as "needs" that in truth aren't. Doing with them will be different for many but necessary for large segments of the population. Actually, if I were in a position where we had a job loss, Dish, the Net and unlimited phone service would be among the first things to go along with restaurant meals.
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Post by crazielollie on Jan 25, 2009 15:09:35 GMT -5
Doing with them
Doing without them - Sorry! My head is still full of finances trying to make sure I can still have Dish and dinners out next year.
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Calluna
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Post by Calluna on Jan 25, 2009 15:10:22 GMT -5
A converter is cheaper than cable. I only get one fuzzy channel with antenna, but as cable prices keep rising, I keep being very tempted to go back to that, or just give up TV entirely. The biggest problem is that here, I also don't get internet without cable. They can keep moving channels to the digital line-up, but they aren't going to get me to pay for those services no matter how much they think they will. Otherwise, I can get the news online, and can rent all the movies I want, all for less than cable TV costs. I can always read the news at the office or go back to buying the newspaper.
But, the issue of not having any TV without paying for cable is an important one that I think needs to be addressed. I have no expectations that cable will be functional in the event of a natural disaster. I hardly ever have cable operate uninterrupted during even a thunderstorm. I also really only get one radio station on radios in my house, so if TV and radio are the way we are kept informed of what to do in case of a disaster through those emergency broadcasts, someone needs to make sure people can actually get those messages without cable TV functioning.
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Post by MacBeth on Jan 25, 2009 15:55:00 GMT -5
I was not in favor of only digital TV broadcasting. But the cable companies wanted it, and got it. Not a smart move IMO
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Post by joethree56 on Jan 25, 2009 16:24:14 GMT -5
There is or was more to than that Beth. the main issue was the huge bandwidth usage of analogue tv and the increasing pressure by other forms of communication (especially cellphones etc.) for those precious frequencies. I think the whole TV industry is going to have to restructure anyway as more and more competing media chases the same target audiences. TV companies have the problem of trying to attract audiences at a time of shrinking incomes and are being squeezed by rising costs of programs of any quality. I don't know what shape the future media will be but i would guess at it being firmly internet based.
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Pax
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Post by Pax on Jan 25, 2009 16:42:30 GMT -5
Yeh, they're chomping at the bit to sell those ex-analog frequencies to cell phone providers, etc. I think ultimately it'll be a good thing.
Somewhat relatedly, I think the idea of federal vouchers to help people buy $30 set-top digital converter boxes for their over-air television reception is assinine. When televisions first came out, there was no voucher -- people, if they wanted a television, scraped together the money to buy one. If people want to continue their over-the-air viewing, they can dig up the $30 for the converter box. Talk about wasteful federal entitlement programs -- an entitlement program to satisfy every American's God-given right to watch television? It's not exactly right up there with the right to freedom, the right to free press, and the right to adequate health care.
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Post by crazielollie on Jan 26, 2009 4:36:05 GMT -5
Gosh, Joe, I look at what's on TV and I don't think they shoot for "quality programs". They're few and far between. Of course, it's what draws the viewers, not the quality that matters. Actually, I think the internet is going to take a hit if the economy continues to slide. Recently heard that 80% of the population here is in the cities and the areas surrounding them. If that's the case, TV is free, the net isn't.
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