Yes, Retail Is Dying. No, It’s Not Because of the Minimum Wage.
What Sears is doing wrong (and what independent booksellers are doing right)
In this morning’s installment of Nick Cassella’s essential Daily Clips column, he pointed out a curious Bloomberg story by Matthew Townsend and Lindsey Rupp. The story is about precipitously declining retail sales at brick-and-mortar retailers, and the authors draw some strange conclusions about the cause of those declines. Here’s the problematic paragraph (emphasis mine):
…Retailers are getting hammered on multiple fronts. States have been passing minimum-wage increases that are putting pressure on labor costs. Amazon.com Inc. and other web players continue to take market share, leading to dramatic declines in visits to many malls. Shoppers also have shifted spending toward their homes and experiences while becoming better bargain hunters.
It sure is interesting that on the list of potential causes, state minimum wage increases should land at number one, isn’t it? After all, Townsend and Rupp are describing a nationwide problem, not a state-specific one. (And in fact the recent spate of department store closures have generally left stores in high-wage Seattle untouched while department stores in low wage states are shuttered.) Why wouldn’t they initially focus instead on the rise of online sales, which is clearly a much bigger contributor to this trend? And why don’t they mention costs like Macy’s CEO Terry J. Lundgren’s exorbitantly high salary as a reason for retail’s decline?
Well, it’s because nobody is truly objective and everyone’s got an agenda. Bloomberg is a news organization that aspires to be required reading for wealthy Americans. So for them, playing into the low-wage fantasies of CEOs and high-level executives is just plain good business.
Here in Seattle, we’ve learned that low wages do nothing but create a race to the bottom. The truth is that when retail stores in malls pay their employees higher wages, those employees are very likely to spend more money in those malls: they’ll eat lunch in the food court, rather than brown-bagging it. They’ll buy their coffee rather than bringing in a thermos. They’ll pick up that book or shirt that they’ve had an eye on. But if those same employees, at $7.25 an hour, are worried about making rent, or even paying for gas to drive to their next shift, they’re not going to spend any of that money where they work, especially at Christmas.
But if I can ask for your indulgence for a moment, I want to share some personal observations. My working history includes over twelve years of retail, both working at big chain retail stores and for small independent businesses. I’ve done time at Sears and Walmart and Borders and K-Mart, and retail has always held a fascination for me. Like Paco Underhill, sometimes I’ll go to a mall and walk around, just to see what’s new. As far as I’m concerned, there’s no better way to take America’s pulse than by visiting a mall on a rainy Saturday afternoon.
In addition to my work at Civic Ventures, I’m also deeply involved in the Seattle literary world. I spend a lot of time in bookstores, and I talk to a lot of booksellers. And this has given me a unique perspective on a certain aspect of retail.
Bookstores have it harder than many other businesses when it comes to raising the minimum wage. They don’t enjoy the luxury of raising prices in response to wage increases. Books arrive at stores with the prices already clearly marked, and so an independent bookstore can’t meet a minimum-wage increase by raising the price of a hardcover from $25 to $27. Customers simply wouldn’t stand for it.
So you’d think that Seattle’s independent bookstore scene would be suffering in the face of the city’s minimum-wage increase, but it’s simply not so. In fact, our bookstores are thriving. Last year, a new independent bookstore opened in Seward Park. A little over three years ago, a science-minded bookstore moved to a huge new location on Capitol Hill. Managers found ways to increase efficiencies and cut costs while still providing the excellent customer service that Seattle book-buyers have come to expect.
When I talk to independent booksellers, they often tell me that they see year-over-year sales increases. In many instances, stores that have been open for decades have enjoyed record-breaking Christmas sales since the Great Recession. Rather than losing ground to Amazon, independent booksellers have thrived.
And yet chain booksellers are suffering. National bookselling chain Hastings closed all 126 of its stores last year. In the most recent quarter, Barnes & Noble lost 8% of sales year-over-year. Why are independent booksellers doing well when big box bookstores, seemingly with greater selection and more corporate muscle behind them, are dying on the vine?
I don’t buy very much online. I prefer to try clothes on before I buy, and I like to browse physical shelves rather than let an algorithm do my choosing for me. And I don’t know if you’ve bought anything from a national chain recently, but I can tell you that the customer experience is awful.
The items you want are never on display where you can find them. This is because every inch of corporate retail stores—from Barnes & Noble to Sears—are paid for by vendors, giving the impression that you’re walking through an advertisement that’s not aimed at you. The products aren’t on the sales floor because they’re of high quality and the salespeople love them; they’re there because a brand bought co-op space. So say you eventually find the pack of plain white t-shirts you’re looking for, hidden behind the wall of ugly pants that some brand purchased. You take them to the register. What next?
It’s impossible to buy something from Macy’s or Sears or J.C. Penney without the cashier trying to convince you to sign up for a store credit card. It’s not the cashier’s fault—in many instances they are required to ask every customer, or else they’ll lose their jobs. Then they try to get your email address so they can sign you up to some spammy email newsletter deal. Again, for the employees, it’s a requirement. I know lots of retail employees who’ve been fired because they didn’t meet a quota of customer email signups.
And the employees are usually miserable precisely because they have all these data-driven demands pushing them down every minute they’re at work. They don’t get to be enthusiastic about the items they sell. Their input isn’t valued. Everything comes from the home office ten states away, and if they don’t comply with the bizarre demands from someone who’s never set foot in their store, they’ll be fired.
Compare that to an independently owned bookstore. In any of Seattle’s independent bookstores, salespeople are excited about what they’re selling. In many cases, they love their product so much they’ve devoted their lives to it. Every creative display features books that someone in the building has loved and ordered specifically because they want people to read them. You can ask for recommendations and they’ll gladly give them to you, with no pay-to-play co-op schemes involved.
In most Seattle bookstores, you can buy a coffee and a fresh pastry at an independently owned cafe that sells local food. They want you to stay and spend your time there. They bring authors to town to read from their books and answer your questions—and those readings, remarkably, are almost always free of charge. They provide book clubs for people to come and talk about what they loved and didn’t love about the books. If you think they should carry a certain title, they’ll order it for you. The store reflects its community in a fantastic, obsessively hyper-local way.
And so you find the book you want (and a few you didn’t know you wanted.) When you take your armload of books up to the register, you won’t be pestered mercilessly by some drone listlessly reading a script off a screen in hopes of scoring all your mine-able data. There’s no predatory store credit card. You just get your books, a smile from a human being who doesn’t hate their job, and you’re on your way.
In the end, the difference is this: Whenever I go to a mall or a department store or a chain movie theater or a big box store, I see a race to the bottom. I see management that fails to trust its employees and I see a setting that has been algorithmically designed to suck all personal expression out of it. When I visit an independent bookstore or clothing retailer or movie theater or coffee shop, I see real humanity all around me. I’m not just buying a product or a service, I’m taking part in a unique story, an experience that exists only in my community.
Some might argue that chain stores are cheaper and, therefore, superior. And it’s true: independent stores sometimes cost more than their big-box counterparts, which in turn cost more than online retailers. But that’s only because we’ve encouraged a system in which huge corporate low-wage employers can skirt taxes and funnel profits out of communities. Seattleites understand this: when you patronize a local restaurant rather than a chain, your money stays local, supporting your neighbors and building your neighborhood. The long-term rewards are exponentially greater.
Until big retailers realize this—until they acknowledge that their employees are the greatest investment they’ll ever make, that customers want to shop in a place that doesn’t look like everywhere else, and that people visit stores and restaurants for unique experiences—I expect retail sales to continue to plummet. And I expect CEOs and reporters to continue to wrongly blame minimum-wage employees for dragging them down, when in fact those employees are actually the key to their successful future.
