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Secretary-Treasurer’s Report

New trends are sending retailers reeling

These are tough times for the retail industry.

You can find plenty of evidence of this at your nearest mall or retail “power center.” Chances are you’ll see at least one vacant shell where a familiar retailer used to operate.

A recent article by Derek Thompson in The Atlantic reports there have been nine major retail bankruptcies so far in 2017 — as many as we experienced in all of 2016.

Sports Authority and Sport Chalet have struck out and are out of the game. Payless ShoeSource is down on its  heels with a Chapter 11 bankruptcy. RadioShack is sending out an SOS after closing more than a hundred stores.

Stock prices are tanking at such apparel mainstays as Lululemon, Urban Outfitters and American Eagle, and Sears and Macy’s are following a similar path with massive store closures of their own.

What’s going on? We can’t blame the overall economy, which has been growing steadily for eight years. Unemploy­ment is shrinking, wages are inching up and low gas prices are expanding the spending power of Americans.

Thompson cites the following trends that are contributing to an “extinction-level event” in the industry:

    1. Internet commerce: Amazon and beyond.The retail industry is being conquered by the Amazon empire. Jeff Bezos’ company is growing at an incredible rate, with sales volume quintupling between 2010 and 2016. Half of America’s households now subscribe to Amazon Prime!

      As new apps and online startups are making it easier than ever to shop and purchase goods through one’s smartphone, brick-and-mortar retailers are forced to match the prices of their Internet competitors while still paying high rents.

    2. We have too many malls already.While there will always be stores, the new realities are destroying the economic models that created the shopping mall as we know it.

      The number of malls in the U.S. grew more than twice as fast as the population between 1970 and 2015, a pace that was unsustainable. Mall visits declined 50 percent between 2010 and 2013, according to the real-estate research firm Cushman and Wakefield, as club stores and online commerce continue to squeeze anchor tenants like Macy’s and Sears.

    3. Americans are becoming more social and less materialistic.Consumers are spending less on designer-label clothes and spending their dollars instead on “experiences” such as restaurants and travel.

      Last year, U.S. airlines set a record with 823 million passengers. Also in 2016, Americans spent more money in restaurants and bars than at grocery stores.

Thompson concludes his analysis with a prediction that “self-driving cars could change retail as much as smartphones.”

Imagine a retailer sending thousands of autonomous minivans roaming the streets of our cities, each one ready to deliver a mini-show room full of goods to our doors whenever we have the urge to look at it.

“The future of retail could be even weirder yet,” Thompson writes.

No matter what happens, I can predict this: UFCW Local 99 will be ready to stand up for workers in the retail sector and all of the industries we serve.

Big changes seen for the grocery industry

Experts have been writing about developments that are changing the ways customers will buy their groceries. How these trends will affect those who work in the industry will be impossible to predict with any accuracy, but our union will continue to monitor them closely and will act vigorously to ensure our members’ rights are protected at every step of the way.

Writing in Forbes magazine, analyst Laura Heller writes about four trends that she believes will change food stores in the years to come:

  • New retailers on the horizon: Two German non-union retailers known for their extreme cost savings are opening stores in the U.S. in 2017. The first is Lidl, which will open its first U.S. store in Virginia this summer. By the end of 2017, Lidl plans to open 20 stores in North and South Carolina. Aldi operates more than 1,600 stores in the U.S., and Lidl is expected to try to match Aldi’s store counts. This would increase competition but also could endanger union market share and lower wage standards.
  • Online shopping: This young trend hasn’t taken off as many industry analysts expected. While Amazon is tinkering with grocery delivery and its cashier-less Amazon Go store, Walmart is trying to expand its grocery pickup service. Kroger also has a similar service called ClickList in which consumers can reserve one-hour windows to pick up their groceries at their local stores. Look for these experiments to continue.
  • Healthier food options at traditional chains: This trend is already hurting the bottom line at Whole Foods, which has posted six consecutive quarters of sales declines now that most traditional grocery retailers offer organic foods. Consumer demand for fresh and healthy foods is driving many retailers to offer more of these options as well as packaged foods without artificial flavors and ingredients.
  • More consolidation: As the airline industry experienced in the 1980s and ’90s, the grocery industry could undergo a new round of corporate mergers. Smaller independent chains may be unable to match the prices offered by their dominant competitors.

Catering to millennials

Meanwhile, analyst Bob Sullivan writes the next wave of changes will be made to catch the attention of millennial shoppers. 

“It’s hard being an old-fashioned grocery store these days,” he writes for Credit.com

“Adults, for the first time since such data was recorded, are spending more money eating out than cooking in,” he says. But even when they do buy their food, young shoppers want something different from a grocery store than what is offered by many of the longstanding chains. 

“Small, boutique food shops that are part-restaurant, part-brew pub, part-exotic grocer are all the rage,” Sullivan writes. 

The irony is that small specialty grocers used to rule the land in the first half of the last century before supermarkets catered to larger groups of shoppers. Now, Sullivan writes, “the do-everything grocery store is struggling to stay relevant.” 

Like it or not, changes are coming, and it’s best to be aware of them so we can help guide them instead of merely reacting to them.