One of the most cherished institutions of capitalism is choice.
Choice fosters competition. Choice results in winners and losers. Without choice, we’d be Eastern Europe before the fall of the old Soviet Union.
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After what is now shaping up as the worst holiday shopping season in nearly 40 years, our choices for everything from electronics to lingerie will start to shrink. According to the latest projections, retailers nationwide plan to shutter 12,000 stores in the upcoming year.
First, There Were Intentions
Dramatic as these numbers might be, they only represent the likely intentions of the major chain stores such as Sears and Target. Bankruptcy will force the liquidation of several retail icons, starting with Circuit City, Linens n’ Things and American gadget-seller Sharper Image.
While these closures may change the face of your local mall, the real worry is how this upheaval will alter Main Street. Not since the Great Depression have more small and family-owned businesses been closer to the brink.
It was hard enough to compete for market share with big box discount retailers. In the coming months, small and family-owned enterprises will not only face increasingly fierce competition for a sliver of the shrinking consumer pie, but they must confront this struggle without access to the normal channels of business financing.
Three-Fourths Discounts Don’t Work
During November and December, traditionally the biggest retail months of the year, consumers spent at least 20 percent less on women’s clothing, electronics and jewelry. If this trend continues, analysts project that up to 200,000 stores may close in 2009. In 2008, a record 160,000 shut their doors.
Discounts of 70 percent off or more by Macy’s, AnnTaylor Stores Inc. and other retailers failed to prevent a spending drop of as much as 4 percent during the final two months of the year. Major retailers like these may be able to weather the storm through such tactics, but small and family-owned businesses can’t.
One of the most daunting challenges that President-elect Obama will confront is the preservation and revitalization of small and independently-owned businesses.
Down in One Sector, Up in Another
Preventing the increasing wave of foreclosures may be high on his political agenda. But the upswing in foreclosures actually has stimulated the flagging housing market, and eventually it will bring more capital into that sector of our economy.
Politics aside, however, if Americans have fewer places to work and shop, then it really won’t matter what the government does to safeguard the integrity of our neighborhoods.
Attention, Walmart shoppers …
John Cohn is a senior partner in the Globe West Financial Group[ based in West Los Angeles. He may be contacted at www.globewestfinancial.com
