Target recently announced it is closing nine stores in four metropolitan areas: the San Francisco Bay, Portland, Seattle, and New York. The major retailer cited organized crime and retail theft as the reason for the “unsustainable business performance” of such stores.
Target is not alone. Other major chains are making the same decision. But it’s not just theft that is making life difficult for these companies. Other pressures triggered by the Covid-19 pandemic have changed the conditions for business in urban cores, according to an analysis of economic data by CNN.
Even before the pandemic, physical store closures were already on the rise: 2019 recorded more store closures than 2020, according to data from Coresight Research.
So, what is behind these closures?
1. High-income individuals have migrated away from major cities
As the pandemic unfolded and many office jobs transitioned to remote work, many workers moved away from major cities – large urban counties experienced a net loss of more than 800,000 residents between July 2020 and July 2021.
As these workers left the city, they stopped patronizing downtown businesses, and their permanent absence reduced demand for retailers in those neighborhoods.
2. E-commerce is diverting customers from physical stores
Recent estimates from the Department of Commerce suggest that the increase in online shopping induced by the pandemic is here to stay.
When Covid-19 hit, online retailers saw their market share grow from about 11% of total sales at the end of 2019 to 15% at the end of 2020.
3. Retail still faces labor shortages
The labor shortage has particularly affected sectors where employees were considered “frontline” during the pandemic. Although some industries have recovered, a recent analysis by the U.S. Chamber of Commerce concluded that, as of August this year, 20% of retail positions remained open.
A study by McKinsey found that 76% of respondents who left retail jobs did not return, many citing lack of professional flexibility and low wages.
Crime and violence may also be contributing factors to the non-return of these employees.
Source: CNN