Economy & Business

American Retail’s Fast, Furious Decline

(Photo: Luba Myts)
One in ten employed Americans works in retail. Those jobs are going away.

Midwest City, Okla. — Heritage Park Mall is a tomb, a crumbling and boarded-up monument to a particular weird moment in American history when we did that most American of all things: attempt to perfect a community by rebuilding it from scratch. With its shops and restaurants and public spaces, and its proximity to banks and offices, the American shopping mall was the reincarnation of the downtown business district, moved indoors where it could be air-conditioned, efficiently policed, and surrounded by a sprawling Salton Sea of asphalt to provide ample parking. The old downtown died most places, and, now, the new downtown is dying, too: At the highwater mark, there were about 5,000 malls in the United States, and there are now 1,100, at least 400 of which are expected to close in the next few years. In the 1980s, developers built an average of 60 malls a year — and more than 100 in some years. Now, cities from San Bernardino, Calif., to High Point, N.C., are dealing with the husks of these dead retail behemoths. There are documentary films and TED talks about dead malls.

“I remember it fondly,” says longtime resident and city councilman Sean Reed, recalling Heritage Park Mall. “We used to go there when we were little kids and wander it all day.”

Cameron Crowe’s 1982 magnum opus, Fast Times at Ridgemont High, is a deep meditation on a number of subjects: marijuana, Thomas Jefferson, and statutory rape among them. But the name is all wrong: With apologies to Mr. Hand, what happens at Ridgemont High is a relatively minor part of the story — the real story is about fast times at Ridgemont Mall, the lightly fictionalized cinematic version of the Sherman Oaks Galleria that is at the center of the Ridgemont High universe and was, for a minute, something close to the center of American pop culture. Frank Zappa made a hit record that consisted of little more than his daughter aping the speech patterns of the mall’s young female customers over a fairly generic (for Frank Zappa) guitar track. “Valley girl”–speak spread like an infection over the land.

Sherman Oaks Galleria is far from Oklahoma, but its story is a familiar one.

After an ignominious decline during which it was reduced to something like an indoor version of New York City’s Canal Street — and also, this being the United States of God Bless America, after a whole lot of litigation — the Sherman Oaks Galleria was more or less put out of its misery. Gone is the mauve Art Deco–by–way–of–Patrick Nagel interior, though the movie theater remains. Most of what remains was converted into office space — Warner Bros. is a client, but it is mostly mortgage lenders and other financial-services companies. The rest has gone the way of Chess King and red nylon parachute pants. The hubris of the 1980s is well under the heel of Nemesis: Duran Duran just played a two-night engagement at the Agua Caliente Casino Resort Spa in Rancho Mirage, Calif.

The emergence of the mall as the preeminent public space in American life may seem like one of those weird inexplicable 1980s things, like 18 percent mortgage rates, American Psycho, or the presidential candidacy of Walter Mondale. But it was in a sense only a reversion to ancient norms: In Singapore, there is a large shopping mall called “The Forum” (which was, and is, a common name for malls), while the one in Santo Domingo has a more Hellenic moniker: “Agora.” But if you go back and watch Fast Times at Ridgemont High, what’s really remarkable isn’t the underage sex or the terrible fashion sense or how close in retrospect the 1980s were to the 1960s (nice hippie wagon, Spicoli) or any of that.

It’s that all those middle-class, white, suburban high-school kids had jobs.

‘I don’t think it will ever be a mall again.”

Councilman Reed, who serves this modest suburb of Oklahoma City with an economy dominated by Tinker Air Force Base, says that the thing his constituents ask him about most often isn’t their taxes or schools or 911 response times but the festering corpse of Heritage Park Mall, a retail graveyard in a downward-bound corner of this city that hasn’t housed much in the way of commerce or food courts (seriously, not even an Orange Julius!) in many years, the only remaining customer-facing enterprises being those two great totems of the American 20th century: a Sears and a charismatic megachurch.

Heritage Park Mall died the way malls die. But the greater Oklahoma City metropolitan area is not very much like Southern California. A high-profile chunk of real estate in Sherman Oaks is going to become something. In Midwest City, Okla., the best-case scenario may be that the mall becomes nothing. Three options are on the table as the city tries to work out what to do about the vacant mall. One plan is to try to rehabilitate the interior retail space, but Reed does not have much confidence in that plan, and neither do many other people in Midwest City. A second option is to try to convert the property into a mixed-use development, meaning office spaces, townhouses, and whatever retail can be lured in. Midwest City is not shy about using public resources to encourage retail development: The mall may be dead, but across town a new strip mall has been built with tens of millions of dollars in tax incentives.

Option three? Knock the damned thing down. The Sears and the church would remain, and the rest would be converted into a park.

A dead mall is a problem. It’s a blight and an eyesore, for one thing.

The owner of the property has plans of his own — he wants to wall off all but a few thousand square feet of retail space and rehabilitate the sequestered space, fixing the mall up in segments — but so far no one seems to be taking them all that seriously.

A dead mall is a problem. It’s a blight and an eyesore, for one thing. Heritage Park is boarded up, and sometimes the grass is allowed to get a little tall. There are financial problems as well: Heritage Park Mall used to produce more than $1 million a year in revenue for Midwest City; what little commerce still exists on the property (there’s a Pelican’s Wharf restaurant detached from the mall proper but on the lot) produces about $70,000 a year. That’s a big hit: Sixty-five percent of the ad valorem taxes generated by the property had been earmarked for the schools. And while the mall isn’t producing much revenue, the city still has to police it and protect it against fires. (Fire marshals tend to take an especial interest in boarded-up, abandoned buildings with large, open interior spaces.) Replacing those lost tax funds has not been easy: In a sprawling metro area such as Oklahoma City, there’s a new municipality every couple of miles in the exurban stretches, meaning that businesses that left the mall but set up shop elsewhere often did not do so within the boundaries of Midwest City, which is festooned with a lot of signs offering residents the advice (economically illiterate but popular) that they should “buy local.”

The more common sign says For Lease.

Because the thing is, it isn’t just the mall. Heritage Park is bounded on three sides by commercial properties with a lot of vacancies. The shopping center to the north is between a quarter and a third vacant, and the tenants in the occupied spaces — Ron’s Burgers and Chili, New York Nails, an animal hospital, People’s Church and its nearby PC Kids center, a physical therapist, Hearing Aid Center, Midway Clinic, Rupert Thomas OB/GYN, a tanning salon, and an Edward Jones — all have something in common: They are in businesses that require physical presence. (Yeah, you can trade stocks online, but that isn’t exactly what Edward Jones does.) Amazon is in all sorts of businesses, but it is not yet offering to watch your kids or minister to your labradoodle or your reproductive plumbing or your immortal soul. On the other side of the mall, there’s a blood-plasma donation center two doors down from an Arby’s — if you are in search of the Eliotic objective correlative for despair, there it is. The shops that are thriving are like the jobs that are thriving: They are difficult to outsource.

And shops and jobs go together: One in ten employed Americans works in retail. Retail salesman is the single most common job in the United States, according to the Bureau of Labor Statistics. And while much has been made of the decline in old-line industrial jobs that carry a certain nostalgic charge, there are 17 times as many retail jobs as jobs in automobile manufacturing, 100 times as many retail jobs as steel jobs, and 210 times as many Americans working in retail as in coal mining — not just miners, but all coal-mining jobs, from CEO on down. Shop jobs mostly are not especially high-paying (though they sometimes are), and they tend to be held by workers who for various reasons — sometimes lack of skill and education, but also things such as the need for flexible scheduling or physical limitations — often do not have a great many desirable options. People sometimes scoff: “Yeah, creative destruction is great — we’ll just tell all those unemployed steelworkers to become software designers!” But the fact is that steel mills and mines and factories employ a great many highly educated and highly skilled people, from engineers to machinists, and they are a lot more likely to be able to find good new jobs than is the 48-year-old mother of three who works four days a week at the local Sears. That job may not provide enough to support a family of five, but it may very well pay enough to take care of the mortgage and the electricity bill — for two-income families, those modestly paid retail jobs aren’t about pin money.

Those jobs are going away.

We see here the very familiar contours of a bubble. After decades of rapid expansion, retail is in sharp decline, with stores closing at a higher rate today than they did during the financial crisis and recession of 2008–09. Bebe, which at its high point operated a couple of hundred shops, soon will be online-only. Clothiers such as Rue 21, Payless, and Limited are closing hundreds and hundreds of outlets. The sporting-goods business has seen a bloodbath: Gander Mountain is bankrupt and closing stores, another victim of the contraction that took down MC Sports and Sports Authority while putting serious downward pressure on the finances of the survivors.

After decades of rapid expansion, retail is in sharp decline, with stores closing at a higher rate today than they did during the financial crisis and recession of 2008–09.

Some 8,000 stores are expected to close this year.

The migration of retail out of shops and onto the Internet has been significant — last year saw online retail pass a symbolically important milestone, accounting for 51 percent of all purchases — but it wasn’t radical or unexpected. In fact, the retail building boom really kicked off at the same time as the rise of online commerce: in the middle to late 1990s. Which is to say, the retail-space bubble inflated in parallel with two other important bubbles: the dot-com bubble and the much more significant housing bubble.

When housing prices were skyrocketing around the turn of the century, Americans did not use all that new wealth to pay down household debt or start high-tech enterprises in their garages or anything like that: They monetized that equity and bought gigantic televisions. They bought new furniture and clothes and shoes, and the consumer-goods market began to look like another one of those can’t-miss propositions that come along and cause trouble every few years. Retailers and developers responded by building new shops and strip malls, taking advantage of millennial-era cheap money to leverage the hell out of themselves in the quest for growth and volume. They loaded themselves up with debt that is perfectly bearable when profit margins are 11 percent but deadly when they’re 7 percent.

In addition to cheap money, they also took advantage of a lot of free money: Note that even as it struggles with a zombie mall and high vacancy rates in nearby retail centers, Midwest City is using tax dollars to subsidize the development of yet more retail space on the other side of town, the world of Panera and Starbucks. More retail space means more sales-tax revenue, and if you take a short-term and relatively narrow view — the typical political view — then spending a few million dollars to make sure that whatever new conglomeration of Pei Wei, HomeGoods, and Lane Bryant is getting built gets built in your taxing jurisdiction rather than the one next door looks like a pretty good investment. Which it is.

Until it isn’t.

Big operators of malls and retail space such as Pennsylvania Real Estate Investment Trust are taking a beating: PREIT is down 20 percent for the year, and if you judged by its press releases, you’d think all PREIT’s people did all day was chase down tenants to replace moribund Sears locations and occasionally replace the company’s chairman. The investment houses can (and will) take care of themselves. But what about all that vacant space blighting up cities and towns across the country? And what about the people who used to work in all those stores?

The first job of Oklahoma City’s Heather Boulware was at a TG&Y, which middle-aged residents of the southern half of the United States may recall as “Toys, Guns, and Yo-Yos.” It was what our grandparents would have called a general store. “It was like a Super Walmart without the groceries,” she says. She started working there when she was 15 years old. Hers was a common experience: She was earning a little money — “a whopping $3.35 an hour” — which she invested in the things kids invest their money in: “I got paid every two weeks, and I’d buy books and go out with my friends. Some of it, I saved up for Christmas presents for my family.” TG&Y offered its employees a discount, and another benefit that made Boulware the heroine of Christmas morning: “I worked there the Christmas that Cabbage Patch dolls were huge. We got a shipment, and they let me hold one back for my little sister.” Now that she is an adult with children of her own, she understands that what she was actually investing in was learning how to have a job. “I had to be accountable,” she says. “I had hours, had to be there on time, had to be clean and dressed appropriately. And I had to interact with people in a way I hadn’t before: In a job like that, you have to answer questions, and if someone is kind of mean to you or critical, you can’t stomp off and cry. I wasn’t a kid at work — I was an employee.”

But there are fewer opportunities like that today, and there will be even fewer in the near future. Boulware’s daughter skipped retail entirely and worked in a series of food-service jobs while attending college. “She’s a college student, and she says that this isn’t her ‘big-girl job.’ But she makes good money, it’s flexible, and she can go to school and study while having the freedom to do things she won’t be able to do when she gets her big-girl job, which will be as an English teacher.” Working changed her daughter. “She already was fairly responsible — much different from me when I was that age. But when she started working, she was more mature, less confrontational, and able to see things from a different point of view. And she became much more independent.”

The real value of the first job is that it leads to the second job, and the third.

The Boulwares are statistical outliers: In the 1980s, about 40 percent of those 16 to 17 years of age were employed, as were nearly 60 percent of those 18 to 19 years of age. Less than 15 percent of that younger cohort is working now, together with about 35 percent of the older group. Fewer of those jobs at Ridgemont Mall and its food court are being filled by middle-class teenagers. Who is working there? Illegal immigrants are eight times as likely to work in service jobs as in agriculture. The Pew Research Center puts the illegal-immigrant share of the restaurant work force at 11 percent, while the pro-immigration labor-activist group Restaurant Opportunities Center United puts the share at 30 to 40 percent in major urban areas.

It often has been observed that the real value of a first job is not the money earned in that job: The real value of the first job is that it leads to the second job, and the third. At the high end, retail work can be extraordinarily lucrative: Texas Monthly reported that competition for top salesmen at high-end department stores resulted in salaries exceeding $100,000 a year — and that was in 1997. But the same is true today: Walmart district managers earn incomes well into six figures, as do high-performing managers at similar companies. Three-fourths of them begin as hourly associates. Walmart likes to tell the story of Claudine McKenzie, a daughter of poor Caribbean immigrants who went to work for the company as a temp when she was 20 years old and three months pregnant. She went on to become a highly paid manager. Along the way, she received benefits ranging from paid maternity leave to generous insurance to the company’s “Life with Baby” program, which helps educate young parents about the resources available to help them with their new responsibilities.

But the decline of retail will mean fewer stores and fewer starting jobs at those stores, constricting the path from unskilled hourly worker to richly remunerated manager. Fewer people will have the opportunity to learn and to demonstrate those basic elements of personal accountability — keeping a schedule, making peace with difficult customers — that Heather Boulware spoke about.

Those dead malls are a visible testament to what the decline of retail means to American communities: blight, lost taxes, public nuisances. But there is an invisible testament, too: It is not so much a matter of jobs lost in the present but of jobs that never come into being in the future. What all those teenagers and low-skilled workers need isn’t a $15 minimum wage but a foothold, a way to enter what is after all the world’s most productive economy and begin the process of advancement. For the kids headed to Stanford and Silicon Valley and Wall Street, the way ahead is, for the moment, fairly clear. For the dead-average 17-year-old who intends to — maybe has to — move out of his parents’ house next year and into a life of self-sufficiency, who not long ago might have gone down to the local Sears or Circuit City or hardware store and started a new job 24 hours after asking for it? That way is less clear. But what is quite clear is that our current system of education, which focuses the great majority of its energy and resources on those students at the very top of the performance curve and those at the very bottom, is not doing very much for those in the middle. It is as relevant to the 21st century as an Orange Julius or a Chess King outlet — dead as Heritage Park Mall, even if it doesn’t know it yet.

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