SUNDAY EDITION | Louisville hit by retail blues, but bright spots remain
In the Louisville area and across the U.S., the retail industry is in the midst of a transformation brought on by the rise of e-commerce. Some analysts predict more than 8,000 physical stores could close this year.
LOUISVILLE, Ky. (WDRB) – Ralph London is telling the truth when he explains what he does for a living. “I’m a trucker,” he deadpans.
His lime-green truck is filled with sundresses, women’s tops and skirts. He has been driving the Betty Jeffries Mobile Boutique for about three years, selling clothes inspired by his late mother and company namesake.
After a career in traditional retail, London now has the flexibility to set up at festivals, flea markets and home parties at a time when other retailers are locked into brick-and-mortar locations, battling the rise of online shopping or closing stores altogether.
“I just wanted to create a different experience, a different shopping experience and really kind of get my brand out there to where the people were,” he said.
In the Louisville area and across the U.S., the retail industry is in the midst of a transformation brought on by the rise of e-commerce. The financial services company Credit Suisse said last month that due to an “unprecedented change in consumer shopping behavior,” online buying could double in the next five to 10 years, climbing to as much as 40 percent of all sales.
Meanwhile, analysts predict 8,640 physical stores could close across the country this year – the most dating back to 2000 and even more than those that shuttered during the financial crisis of 2008. Already this year, Macy’s, Kmart and Rue 21 are among the retailers that have declared plans to close stores in Louisville.
Those and other closings could have big implications for local employment, as retail accounts for about 10 percent of jobs in the 13-county Louisville-Southern Indiana metro area.
The tectonic shift in retail has yet to show up in government employment statistics covering the local region, which had about 67,000 retail jobs in 2016.
In fact, the 14,000 jobs at local department, home centers and other general merchandise stores last year were the most in at least a decade, and retailers were on pace to add more positions this year, according to federal data for the first three months of 2017.
But it can take a year for the job losses from the store closings announced this year to show up in employment data, said Manoj Shanker, a former economist for the Kentucky Office of Employment Training. Employees oftentimes stay on payrolls for going-out-of-business sales and other tasks.
“They don’t shut down immediately,” said Shanker, now principal of the Meench & Shanker consulting firm in Frankfort. “They have to go through a whole process. It takes a while.”
He is bracing for a decline in retail jobs as the stores close. But with a relatively low unemployment rate of about 5 percent in Kentucky, those workers making $10 to $15 an hour should be able to find other jobs, he said.
“It’s much easier for people to switch to something else,” he said. “It’s not like eastern Kentucky, where coal miners were getting $50 an hour and suddenly they’re forced with the reality that with a high school education, you can only find something for $10 an hour.”
While some retailers have struggled, outlet malls have surged as sales reportedly have doubled to nearly $50 billion in the last five years.
The sprawling Outlet Shoppes of the Bluegrass, which opened in 2014 along Interstate 64 in Simpsonville, has nearly 100 retailers with “a small amount of open vacancy” among its 300,000 square feet, marketing director Amy Duke said. Most of those vacant spaces are expected to be leased this fall, she said.
“We’re a destination. That’s what sets us apart from your traditional, sort of regional mall. We encourage our shoppers to come out and spend the day with us,” she said. “We have a great mix of stores that gives you that fashion at a value price range, and I think everyone these days is looking for ways to save extra dollars.”
In Louisville, nearly 99 percent of retail space at Mall St. Matthews was leased, while 96 percent of space at Oxmoor was rented.
As e-commerce has hobbled some retailers, it’s also fueled the growth of companies such as Amazon that ship and deliver products bought online. In 2013, Amazon opened a fulfillment center at the River Ridge Commerce Center in Clark County, Ind.
Amazon originally thought it would create up to 1,050 jobs there, but the company now has more than 2,500 workers at River Ridge. It has more than 12,000 employees in Kentucky, including at warehouses in Shepherdsville south of Louisville, and 9,000 full-time employees in Indiana.
The metro area has seen steady growth in “transportation, warehousing and utilities,” the sector that includes jobs at facilities like Amazon’s. The sector had nearly 50,000 positions last year, an increase of roughly 7,000 over five years, according to figures from the U.S. Bureau of Labor Statistics.
The rise of online shopping is the latest “structural shift” to the retail industry, following on the heels of big-box stores such as Walmart, Barnes and Noble and other large companies that helped usher small, locally-owned stores out of business, said Reed Weinberg, president of the PRG Commercial Property Advisors real estate brokerage.
“We were overbuilt in retail in general since the 80's and 90's--too many stores built,” he said. “That, combined with the rise of e-commerce is kind of the perfect storm.”
That storm is making landfall in malls and shopping centers, where large anchor tenants and smaller retailers alike are pulling up stakes and leaving space vacant.
In Louisville, Macy’s is shutting down its Outer Loop store at Jefferson Mall as part of a broader strategy that focuses on fewer stores and better customer service that comes as the company saw a five percent drop in sales during the first quarter. In all, Macy’s has said it plans to close 100 stores in the U.S.
The Macy’s at Oxmoor remains open. A spokeswoman declined to say how many employees at Jefferson Mall will lose their jobs, and whether any of those workers have been offered or accepted positions at the St. Matthews store.
The Jefferson Mall store won’t stay vacant. CBL & Associates of Chattanooga has agreed to buy the store and lease it for another use.
“That’s what you’re seeing at malls across the country where large big-box users are vacating, and I think mall owners are trying to think creatively outside the box to replace it with other users,” Weinberg said.
In some cases, the vacancies aren’t limited to a store here or there. The departure of the ailing retailer Kmart from the Louisville area has left neighborhoods with vast abandoned parking lots and empty buildings known as “greyfields.”
Kmart closed its last store in the area this year. There are now vacant buildings on Poplar Level Road, Outer Loop and Taylorsville Road representing hundreds of thousands of empty square footage.
“The good news is we don’t have a lot of large boxes like this on the market,” said Justin Baker, principal broker and partner at TRIO Commercial Property Group, which has been involved in deals involving the former Kmarts.
He said TRIO represented Kroger, which built a store on a former Kmart site on Dixie Highway, and a company that bought a former Kmart in New Albany and plans to renovate it.
In many cases, the Kmarts were neighborhood fixtures for decades. With new uses now possible, “it’s like a breath of new life in these shopping centers,” Baker said.
The ARC Cos. bought the former Kmart on Grant Line Road in New Albany, Ind., and is negotiating with tenants that would use the 91,000 square-foot building once it’s subdivided, said Alan Muncy, the company’s president. He expects renovations will start in the next three months.
Muncy said the site has a “ton of potential” because of its proximity to interstate highways and traffic on Grant Line Road.
“What we try to do is look for those large properties that maybe someone else doesn’t know what to do with -- or drives by every day and they’ve kind of forgotten about -- and we actually see the potential to take that building and redevelop it,” he said.
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