13
Nov
08

A cold December wind is coming both literally and economically

There is a cold wind howling getting ready to sweep across this nation. Unsuspecting multitudes will suddenly find themselves without shelter and directly in the vortex of the approaching storm. Few will believe it is for real, and fewer still will have a clue what to do. Confusion breeds despair and despair breeds disillusionment.

The next six weeks leading up to Christmas will make or break countless retailers across this country. Depending on how bad the upcoming shopping season ends up being, there will either be many companies filing for bankruptcy come January, or there will be MANY companies filing for bankruptcy. Either way, what is coming will have a huge bearing on the ability of this nation to continue to buy and sell for months.

My most trusted weather sources tell me with full assurance and confidence that the majority of the next six weeks are going to be very cold, if not bitterly cold over the entire eastern part of the country. This presents two major challenges. First is the obvious problems that will ensue if snow and ice are added into the cold weather. This keeps people from driving to stores to do their shopping. December’s with brutally bad weather have had devastating effects of retailer’s bottom lines in good years. It could financially ruin countless retailers this year.

The second problem deals with heating bills. The colder the start to the winter, the more people will be forced to plan for sky high energy bills come January and February. If money has to be allocated to pay for heating bills, that is money normally spent on presents for uncle Bill and aunt Jane for Christmas. Putting these two situations together there lies the potential for a major cut back in spending the next six weeks.

While the ever deepening economic crisis still doesn’t have a direct impact on everyone yet, the longer it drags on and the deeper it gets; in due time everyone will feel its pinch. As the situation gets worse, horrible decisions will have to be made by families and by businesses as they determine where to cut expenses in order to starve off bankruptcy. Employers cut jobs and families cut all unnecessary things in order to have enough to pay the bills.

In our little town there is an outlet mall which was built about ten years ago. There are about 50 spaces for stores in the complex. Every year the stores renew their lease in January for the next year. Thus, if a store is closing, it does so in January. Three years ago, there were perhaps 5 empty storefronts in the whole mall. Two years ago, there were about 6 stores which closed in January. Last year, the rates of closing accelerated and there easily was 15 stores which ceased operation in January, including one of the anchors.

This past year, the mall has operated at less than 50% capacity. Rumor has it that another 10 stores will close in January of 2009. If this happens, there will only be about 15 stores trying to stay in business. This exact thing has happened in many smaller outlet malls around the country the past few years. Once the bus leaves the station, it is very hard to catch a ride.

There is a huge combination outlet/regular mall in the northern suburbs of St. Louis which was only opened about 5 years ago and was fully occupied just two years ago. The last time I went there a few months ago, there are entire wings which have no occupying stores. I would guess the occupancy rate at the current time to be no more than 50% for the entire complex.

Retail stores and restaurants are hard businesses to prosper in. They are the first ones to feel every economic downturn and they are the ones hurting the most right now. As people continue to cut back everywhere they can, they have to say goodbye the weekly night at the restaurant and the constant trips to buy things at the stores. Times are getting tough and only going to get tougher.

Just a little word of warning here; now is the time to prepare for what is coming in January through March. Those three months could be very difficult ones to endure as the economy bottoms out and the various new stimulus plans take awhile to get in place and moving. As counterproductive as it sounds; this is not the season to make your friendly neighborhood retailers too happy. Make sure you save something to get yourself through the upcoming difficult winter months before the thaw next spring.

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