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Retailers face unrelenting challenges in pandemic era

We’ve been doing a lot of lamenting these days about the demise of some of the biggest names in retailing. One-time giants in the industry are either closing stores at an alarming rate, filing for bankruptcy or going out of business altogether. The once gleaming American mall, a shopping temple of the golden age of retailing from the 1970s through the end of the 20th century, featured department store anchors that were already coming under enormous pressure to survive before COVID-19 and coronavirus became household words.

Green Street Advisors, one of the nation’s most respected retail research firms, predicts that 50% of mall department stores could close by the end of next year.

Of the roughly 1,000 malls still in operation in the United States, about 60% are anchored by department stores. These include 19% by Penney, 18% by Macy’s and 20% by other famous brands such as Lord & Taylor, Dillard’s and Nordstrom.

In the Lehigh Valley, Boscov’s with headquarters in Reading has a prominent footprint and is one of the anchors of the area’s biggest facility, the Lehigh Valley Mall in Whitehall Township and another big mall in Palmer Township.

Boscov’s finances, including its low debt burden, are better than most, but its chairman, Albert Boscov, said that the company took a big hit during the height of the pandemic.

JCPenney, Neiman Marcus and J. Crew are three of the nation’s well-known brands which have filed for Chapter 11 bankruptcy. Kmart is in the process of closing its last store in the five-county Times News area, and other smaller stores - some of them national and international brands - have closed down.

As surviving retailers, most of which were reduced to online sales for more than three months, begin to slowly reopen with new protocols on store capacity, social distancing and mandatory facial coverings, the goal of some of these legendary brands is to survive until better times return.

The companies without a financial cushion coming into the pandemic really are feeling the pain. Retail sales had dropped 16.4% in April compared to the previous year and have shown just slight improvement since then as the country slowly begins the reopening process.

Companies large and small have been pulling out of the marketplace mostly because they have been unable to get sufficient funding and because their creditors could not see a path forward for them.

Some malls themselves have become endangered species. The Schuylkill County Mall near Frackville, once a thriving beacon for the region, shut down more than two years ago and was demolished.

Once one of the largest malls in Pennsylvania, the Schuylkill Mall featured anchors Hess’s, Sears, Kmart and later Pomeroy’s (bought by Bon-Ton).

Since 2001, about 20 malls have closed in Pennsylvania. The picture across the country is virtually the same. Invariably, the deterioration of these malls often starts when a major retailer or anchor pulls up stakes. This sets into motion a domino effect, because these large anchors promote foot traffic, and when they are pulled from the equation it hurts remaining mall stores.

As if all of this were not enough of a challenge, we now have a new way of life for shoppers who want to resume in-store shopping but who want to do it safely.

At the top of the list, discretionary spending will be muted compared to how things were in February and early March just before the pandemic took hold in the United States.

A lot of people have been financially whacked, and they are going to be cautious about spending money that might otherwise be needed for essentials such as food and monthly bills. Just look at the mind-boggling number of unemployed in the nation, including 1.9 million who filed new unemployment claims in Pennsylvania last week.

Researchers say there may be a brief burst of spending from cooped-up demand, but they believe this will be short-lived. With stay-at-home orders in effect for nearly three months in most Eastern Pennsylvania counties, consumers turned to online buying or stopped discretionary buying.

Until there are greater assurances about safety of in-store buying, this trend may continue, if not to the degree it had been, at least in part. Retailers say that online spending traditionally does not match in-store spending. Additionally, they lose out on those impulse sales when shoppers walk through a store.

For one thing, consumers will be seeking companies which emphasize cleanliness both for the customer and their employees.

Consumers will be more conscious of where goods come from and where they are produced. As a result of this, retailers will also need to be more transparent about their global supply chains. They also will have much higher sanitation costs, which ultimately will be passed on to the consumer.

By Bruce Frassinelli | tneditor@tnonline.com