Not All Retailers Benefit From Spending By U.S. Consumers NPR's David Greene talks to David Wessel, director of the Hutchins Center at the Brookings Institution, about the status of brick-and-mortar retailers.
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Not All Retailers Benefit From Spending By U.S. Consumers

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Not All Retailers Benefit From Spending By U.S. Consumers

Not All Retailers Benefit From Spending By U.S. Consumers

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DAVID GREENE, HOST:

So apparently, many of you have been doing some shopping. Consumer spending is boosting the U.S. economy. And yet, several major retail chains are closing stores or even filing for bankruptcy. And shopping malls, as maybe many of you have seen, have all these vacant storefronts right now.

So today is Cyber Monday, a good day to ask what role online shopping is playing in all of this. And I want to bring in David Wessel here to talk economics. He's director of the Hutchins Center at the Brookings Institution. Hey, David.

DAVID WESSEL, BYLINE: Good morning, David.

GREENE: So talk to me about what is happening to brick-and-mortar retailers in the United States.

WESSEL: Well, as you point out, consumer spending has been pretty strong these days, which is good for the economy because business investment has been so weak. The reason is that the job market is doing well and wages are creeping up. But still, about 10% of all retail space is vacant. I was surprised recently when I walked along Madison Avenue on Manhattan's Upper East Side, just how many for-rent signs I saw in store windows.

And the mall thing is particularly bad. Vacancy rates in malls have been climbing since 2016. They're now higher than they've been at any time at the last eight years. Altogether, the people who keep track of these things say about 7,000 stores have closed in the first half of 2019. That's more than in any previous full year for which we have data. And as you said, several chains that had borrowed heavily have filed for protection of the bankruptcy courts - Payless Shoes, Barneys, Forever 21 and a number of others.

GREENE: It's amazing. I mean, just think of scenes like that that you saw on Madison Avenue are a lot of places United States. If you just go by what you're seeing, it's like - oh, the economy must not be doing well. But as you say, it is doing pretty well. So is online shopping the problem - we're still buying stuff but not from these brick-and-mortar stores?

WESSEL: Yes, that is the biggest reason. PricewaterhouseCoopers does a survey every year at this time of 2,000 consumers. And this year they found, for the very first time, that more people said they're going to do their holiday shopping online or on their smartphones than at physical stores.

Now of course, Amazon is the big winner. But Walmart, Target and Best Buy are adapting to this new world, capturing a share of online shopping with things like you can buy online, pick up in person. Some other chains - J.C. Penney and Macy's - are having a harder time. I was intrigued by a move that Kohl's, a department store that has had some trouble recently, they agreed to accept Amazon returns at their stores in the hope of drawing more people to their physical outlets.

GREENE: Oh, that's so interesting. So I mean, if you're a traditional retailer, is online shopping - is this the single thing you need to deal with, or are there other challenges these days?

WESSEL: No, I think there are other challenges. There's a growing gap between communities in the U.S. that are prospering and those that aren't. And that obviously hurts retailers who serve the latter. And across the country, we see changes in consumer tastes, as we do over time. Recently, I was in Portland, Ore. I talked to a developer named Paul Brenneke. And his real estate developments are driven by his conviction that consumers will spend money for - as he puts it - food, fitness and fun instead of buying stuff at the store.

And a couple of retailers, Penney and Macy's among them, are now catering to the demand for used clothes by selling them at some of their physical outlets. Patagonia is doing the same. They opened their first physical store that sells used stuff. It's in Boulder, Colo. It's called Well Worn (ph).

GREENE: You mentioned at some communities not prospering. Why isn't every community benefiting if we're seeing consumer spending going up?

WESSEL: Well, I think the prosperity in the United States is very uneven. And communities that haven't seen increase in jobs, where the downtowns are suffering - are not doing as well because the people don't have the money to spend. And the answer is those communities have to find a way to encourage economic development so that retailers can serve them - taking advantage of the new tax break called Opportunity Zones. But without jobs, without income, you don't - retailers don't do very well.

GREENE: David Wessel, director of the Hutchins Center at the Brookings Institution. David, thanks.

WESSEL: You're so welcome.

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