America the Over-Stored

By Gross, Daniel | Newsweek, February 25, 2008 | Go to article overview

America the Over-Stored


Gross, Daniel, Newsweek


Byline: Daniel Gross

This decade's building frenzy produced a bumper crop of new retail space. But the occupants haven't materialized.

The carnage in retail hasn't been this bad since an anarchist bombed Chicago's Haymarket Square in 1886. In January, Liz Claiborne said it would shutter 54 Sigrid Olsen stores by mid-2008; Ann Taylor announced that 117 of its 921 stores would be closed over the next three years, and Talbots axed the Talbots Men's and Talbots Kids concepts and 22 Talbots stores. (Those muffled screams you here are Connecticut preppies trying to suppress their rage.) Even Starbucks has scaled back its yearlong saturation-bombing campaign.

Blame that exhausted marathon runner, the American consumer. Fueled by cheap credit instead of PowerGel, she looked great at Mile 16, but bonked at Mile 23 and is now crawling to the finish line. Sales fell in December, putting the cap on a miserable Christmas season. Last week the government reported that retail sales rose 3.9 percent between January 2007 and January 2008. But back out inflation and sales of gasoline, and retail sales fell in real terms in the past year. Clearly, demand is down.

And supply is up. This decade's building frenzy produced a bumper crop of new retail space--from McStrip malls built near new McMansions, to hip new boutiques in the ground floors of hip new Miami condo buildings. But as is the case with those McMansions and condos, the occupants for new retail space haven't materialized. In the fourth quarter of 2007, the national retail-vacancy rate rose for the 11th straight quarter to 7.5 percent--the highest level since 1996, according to research firm Reis, Inc. With new projects coming online--34 million square feet of retail space will be completed in 2008--the rate is expected to spike further to 8 percent. In the parlance of the trade, many chains are simply over-stored.

Developers opening new malls this year clearly timed the economic cycle poorly. And the cultural cycle isn't helping matters any. The extreme consumption of this current gilded age has inspired a backlash. In December, hedge-fund billionaire Ray Dalio ran full-page advertisements in newspapers urging Americans to eschew Christmas gifts and instead make donations to charity. Maybe he's just run out of things to buy. Or maybe he's surfing the Zeitgeist. "There's a glut of stores," says Judith Levine, author of "Not Buying It: My Year Without Shopping." "Our physical, intellectual and emotional and psychological space is filled up with consumption." Levine laments the wholesale transformation of open spaces into enclosed retail environments (like, say, Barnes & Noble superstores, where you can buy "Not Buying It"). And the incessant bombardment of advertising may be inspiring a backlash that pushes people to consume less. …

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