Hamilton Herald Masthead


Front Page - Friday, August 4, 2017

Traditional retail in trouble as consumers shift buying habits

Are Tennessee’s shopping destinations, once beacons of consumer demand, doomed to extinction?

One might think so by reading recent reports on traditional retail outlets. The headlines certainly are attention grabbers:

“The Atlantic,’’ refers to the “great retail meltdown of 2017,” while USA Today and other outlets breathlessly report on 43 more Sears/Kmart closings.

Dig a little deeper, though, and the twin trends of evolution and reinvention begin to appear in the retail sector. More people are shopping online through vendors such as Amazon, and that’s not going to stop anytime soon.

Based on that, it would be easy to think that retail as we know it is dead, or at least kneecapped. But pull back from old-school department stores and mercantiles, and the retail picture becomes a good bit more complex.

“The answer is always in the weeds,” says Bill Kilbride, chief executive officer of the Chattanooga Chamber of Commerce.

“Retail is still there – maybe not in the big malls of the past, but when you look at the stores like Home Depot, Lowe’s and Walmart you see huge retail employers. And as they grow in different directions, they may need 20 more people with a particular skill for each location.”

That said, Kilbride is quick to point out that the retail retention velocity is much higher than other industries, so it’s hard to pin down their numbers for very long.

“People take a job in retail, get a skill set and decide they want to migrate to a call center because it has better hours,” he explains. “And so, they go. That’s why the retail and service sectors have such a high, constant need for people.”

Still, the numbers for more traditional retail, not to mention several other legacy service sectors, are grim.

“Services accounted for three-fourths of the job losses among more than 350 sectors of the private [U.S.] economy in the last year,” Bloomberg BusinessWeek reported in late June. “That’s a big shift from previous decades, when goods-producing categories tended to suffer the most losses.”

For the first four months of 2017, the report showed department stores down more than 26,000 people, while sporting good and music stores were down more than 15,000 and electronics and clothing stores had taken a combined hit of almost 19,000 losses.

The study pointed to online purchasing as one culprit for the physical-location losses, and further posited that more low-paid occupations would become more vulnerable over time due to automation and other structural factors.

Even so, Kilbride and others whose day jobs include monitoring these kinds of trends say that some of those workers are transitioning to newer retail offerings.

Certainly a 50-something store clerk isn’t likely to head out to an Amazon warehouse for work, but those jobs – which some trackers lump under retail and others call logistics – are there.

And in areas like Middle Tennessee, which are drawing hundreds of new residents every month, the hits don’t keep coming.

“Retail follows population growth, and so Nashville is doing better than the state and even the United States over the past decade,” says Dr. Garrett Harper, vice president of research for the Nashville Area Chamber of Commerce.

“But there is a lot of change going on. We study a 14-county region, which has all the major components of retailing, and we’re pretty close to what you would find in the rest of the country.

“But we also look at the workforce analysis, and think that we’re looking pretty good in retail for the next 10 years or so, as well.

“We’ve added about 7,000 positions in the last 10 years, and think we’re going to add another 12,000 in the decade ahead based on the region’s growth.”

Because the Nashville Metro area is large, it will continue to draw different types of retail to service its growing population, which also keeps a retail climate healthy, Harper adds.

“The area is a focal point of shopping, which attracts residents and also visitors,” he points out.

Even as retail might slow, however, there will be enough uptick in other areas that at least some of those displaced workers can find something else, which will keep the area’s overall unemployment rate down.

“Strengthening the Middle Tennessee Region 2020,” a 2015 workforce study commissioned by the chamber pointed that out, notes that “numerous key occupations and skills are chronically difficult to fill, including those in information technology, advanced manufacturing managerial and skilled roles, health care workers with managerial and diverse business and technical sills, construction workers in manual and managerial roles, logistics roles with technical skills and many lower-skill hospitality occupations, as well as others.”

Overall the state might actually be growing in retail, says Dr. Bill Fox, director of the Boyd Center for Business & Economic Research at the Haslam College of Business, University of Tennessee.

“It’s a mixed thing, and the state has been seeing some growth,” Fox explains. “The information is based on tax collections, and so while building materials and furniture for all those new houses have been selling, apparel stores are at a low point. It really depends on where you look.”

Fox also uses dining establishments, which are doing “pretty well,” and music retail in the physical vs. online space, which is down, to make his point.

“A lot also depends on how those numbers get classified,” he says. “Is Amazon wholesale and retail, or transportation and logistics?”

He also notes that the hiring patterns are different for employers in the retail sector, further muddying the waters and making comparisons difficult.

“Five years ago, Amazon was hiring one worker per $1 million in sales, where Walmart was hiring almost five,” he explains.

“That was analyzed by dividing up total employment by total sales.

“As we transition to e-commerce we will see fewer workers in traditional retail, but there are other parts of retail and as consumers drive an economic expansion with spending, hiring will take place in those areas.

“Put that all together and you see something that is a growth engine in some areas, but has collapsed in others. It’s a mixed bag.”

In the end, retail employment, like any other line of work, will always be a little tough to predict, much less to plan for.

“There will always be demographics changes, and peaks and valleys that can be cyclical for certain industries and occupations,” Harper adds.