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June 15, 2017

Chain store closings can be great for small firms

  • The rock climbing gym business Earth Treks looks for shuttered big box stores to expand into new cities and states.
  • By JOYCE M. ROSENBERG
    AP Business Writer

    NEW YORK — When big retail chains close stores, it can be a blow or a blessing for small businesses near the shuttered merchants.

    Many shoppers gravitate to a smaller store when one of the big players shuts down, says Aric Shlifka, the owner of Kiddles Sports in Lake Forest, Illinois. The demise of the Sports Authority last year has contributed to a 5 percent increase in business for him since then, and he's noticed more demand for athletic shoes and bicycles in particular.

    “I feel mass/chain store closings scare people, and make them realize how many jobs and tax dollars are lost and want to support the local retailers more,” Shlifka says.

    As more shoppers shift online, stores have been suffering and chains have been cutting back. Macy's is closing some stores. Sears Holdings Corp. reportedly plans to close another 66 Sears and Kmart stores, adding to 150 closings in April. Many of the store closings are in big malls, but in smaller strip shopping centers, hundreds have also been shutting down.

    Some businesses can see their own sales suffer when a big nearby retailer that has been a shopper magnet disappears. But smaller retail competitors can pick up customers, and sometimes other businesses — ancillary or unrelated to retail — find opportunities in vacant real estate.

    The retail remains of a shuttered store mean franchisees of 1-800-GOT-JUNK? often get contracts to empty out the chain stores, loading dump trucks with unwanted mannequins, shelving, racks, showcases and other fixtures and hauling it all away.

    Corporate executives at 1-800-GOT-JUNK? are regularly in touch with big chains and often know in advance when stores will be closing, says Scott Perry, an account manager with the franchise. It can take a month in some cases to remove and cart away the items; franchisees have handled 150 truckloads from a closed Macy's in Pittsburgh and 120 from a Bon-Ton in Sheboygan, Wisconsin, Perry says.

    James Williams, owner of a 1-800-GOT-JUNK franchise in Burbank, California, says that in removing the contents of a store, his company donates usable equipment like vacuum cleaners to charities and takes furniture and fixtures to businesses that will recycle what they can.

    But there's also a downside for his business when a store closes — he's just lost a customer who regularly needed trucks to haul unwanted fixtures and other items.

    “Some of these were clients that we were serving on a weekly or monthly basis,” Williams says. “We see the negative impact on our business immediately after the closing.”

    When a department store in a shopping mall or big box store in a strip center closes, nearby retailers can see fewer shoppers and lower sales. Some mall operators have staged events and activities near the shuttered stores to attract more shoppers.

    Yogibo, which sells bean bag chairs and other casual furniture, had to work harder to make itself more visible to shoppers after Sears vacated parts of its stores in malls in Freehold, New Jersey, and Danbury, Connecticut, CEO Eyal Levy says. The retailer had a 10 percent sales slide while the Sears space was vacant, and also has had lower sales since a J.C. Penney store shut in Natick, Massachusetts two years ago.

    So it has increased its advertising, offering its chairs to mall operators for events like children's story hours.

    “We had to be more active. We couldn't rely on mall foot traffic,” Levy says.

    On the flip side, when a new tenant moves into the big, empty space, sales at smaller shops pick up as shoppers return to that part of the mall. Yogibo's sales rose between 10 percent and 15 percent when clothing retailer Primark moved into the space vacated by Sears, Levy says.

    Abandoned retail real estate can be a bonanza for a small company. Earth Treks, a company that operates rock climbing gyms, is looking at shuttered big box retailers for possible additions to its current five locations, which are in Maryland, Virginia and Colorado. And it plans to open a gym at Sports Authority's old headquarters in Englewood, Colorado.

    Earth Trek gyms need about 30,000 square feet and they need high ceilings for rope climbing, so “a vacated big box store becomes a viable option to meet those needs,” says Chris Jenkins, chief operating offer of the Columbia, Maryland-based company.

    The retail picture seems dire for many retailers. An analysis by Standard & Poor's found that 14 major retailers had filed for bankruptcy court protection by mid-April, compared with 18 for all of 2016. S&P warned that other big retailers remain vulnerable, which could mean additional closings.

    That has some small businesses wondering whether stores near them could shut down.

    At PMR of Marion, an auto repair shop in Marion, Illinois, manager Nicole Firebaugh says that if a nearby Sears store were to close, she might get a slight bump in business from people who were going to Sears for repairs and maintenance. But a bigger impact would be the loss of Sears as a supplier — the retailer has a big selection of tools including compressors.

    “We're not quite sure where we'd end up going to get them,” Firebaugh says.


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