Tag Archives: retail

The More Things Change…?

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It feels as if I’ve been on “lockdown” forever, and I know others are equally “over” a pandemic that is anything but over. There just aren’t that many rooms to be deep cleaned, that many books to be read, or–in my case–that many blogs to be written.

The rest of the time, then, becomes available for worrying.

I’ve been particularly concerned about what will happen to the center of my city in the wake of Covid-19. My husband and I moved to downtown Indianapolis in 1980, when things were still pretty sketchy, and we’ve celebrated the subsequent rebirth of a flourishing urban core. We’ve been excited to see new homes and apartments being built, we’ve marveled at our inability to patronize all of the new restaurants and bars (although we really tried!). We’ve worried as online retailing has reduced the number and variety of shops.  And we were heartbroken when we drove past all the boarded-up windows in the wake of the one protest that included such destruction.

Predictions about “what will come next” are everywhere. Most aren’t worth the paper they’re printed on (or the bytes they represent), but I tend to respect the scholars at the Brookings Institution, who’ve weighed in with their analysis.

The Brookings report suggests that COVID-19 will accelerate or intensify many trends that are already underway, which makes a lot of sense to me.

The report noted that retailers, along with their landlords and suppliers, were already “responding to multiple industry-wide  trends” (aka “in a world of hurt”) before the coronavirus. Trump’s tariffs hurt an industry that was already reeling from shifts in consumer demand from products to experiences, e-commerce, and the sharing economy. The pandemic is accelerating an already pressing need to embrace new models.

The report is light on specifics, but does predict that profit-sharing leases will be an “increasingly important tool to help new businesses get started, survive slowdowns, and provide a return to landlords who invest in their tenants’ success.”

The report’s predictions about food really comforted me. (Comfort food? Sorry…)

Convergence and hybridization will accelerate in food retail, which will return to be a “revitalizing force in urban life.” IKEA was already a furniture showroom, warehouse, and restaurant. High-end grocers were encouraging shoppers to have a beer. Restaurants were increasingly not just dine-in, but fast-casual or mobile food trucks. Whether through app-based delivery or prepared foods from wholesalers such as Costco, Americans will return to eating much of their food prepared outside the home. In 2017, jobs in leisure and hospitality (which includes all bars and restaurants) grew to outnumber jobs in retail trade. The pandemic is a setback, but not a reset.

On the negative side, the researchers expect that the 50- million- plus low wage workers will continue to face unsupportable housing costs– and that households that previously strained to pay rent will find it impossible. They also see worse labor market outcomes for older workers who lose their jobs.

So what does all of that portend for cities?

Some urban dwellers who have decamped to less dense areas will undoubtedly stay there permanently,  “irrespective of the many amenities and agglomeration economies urban centers have to offer.” But the researchers note that the period following the Great Recession saw major metros gain more population than their suburbs

Why was this happening in a tepidly recovering economy? A good deal was attributable to young adult millennials. Unable to find jobs and housing in large stretches of the country, they found urban centers attractive. Eventually, the economy rebounded, jobs dispersed and many young adults dispersed with them. But large metro areas still prospered even with slower growth, as Brookings’s Metro Monitor 2020 revealed.

What does this mean for the post-COVID-19 period? Much will depend on Gen Z, an educated and racially diverse generation with strong urban roots.

In other words, if Gen Z  wants and needs what urban life has to offer, they’ll opt to remain.

We will face huge challenges once the pandemic is over and Trump is (fingers crossed) a  horrific memory. We will need to restore a functioning and ethical federal government, address our enormous inequalities with social investment and a comprehensive, adequate social safety net–and continue the work of making our cities  vital, livable places to live and work.

 

Counterintuitive…and Interesting

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The most recent issue of The New Yorker has an interesting article about retail establishments and staffing levels.

The conventional wisdom is that in order to profit, retailers must keep costs low, and the most effective way to do that is to have as few employees as possible. As the article points out, however, “Although leanness is generally a good thing in business, too much cost-cutting turns out to be a bad strategy, not only for workers and customers, but for businesses themselves.”

The author quotes from a recent Harvard Business Review study of four large low-price retailers with much higher employee costs than their competitors. These are stores, like Costco, that pay their employees more, provide benefits, and provide more training. They also employ a lot more people.

And–counterintuitively–they make more money. They have higher sales per square foot than similar businesses with thinner staffs, and they experience much less (costly) turnover.

The article doesn’t just look at the successful retailers with larger sales staffs; it also notes examples of the reverse. When Home Depot and Circuit City slashed employees to cut costs, sales plummeted.

I’m sure there are other business practices that contribute to both the positive and negative results. But assuming the Harvard folks are right, assuming they have controlled for other factors and that they have produced sound, compelling evidence that hiring more employees (to a point, obviously) translates into greater profits, I wonder if that evidence would be enough to overcome the conventional wisdom that favors “lean and mean.”

Somehow, I doubt it.

After all, we have years and years of compelling evidence that tax cuts don’t create jobs–but politicians continue to insist otherwise.