Retailers and malls allowed to open ‘may lose money at 50 percent volume,’ expert says

North Carolina

PORTSMOUTH, Va. (WAVY) — As states begin to move toward reopening parts of their economies, not all retailers may initially open up, even if they are legally allowed to.

On Friday at 5 p.m. brick-and-mortar, non-essential retail stores will be allowed to do business again in North Carolina, as long as the number of shoppers in their operating space doesn’t exceed 50 percent of the maximum capacity.

From the small main street boutiques to major multi-level department stores, business doors have been locked across the United States since mid-March in order to help curb the spread of COVID-19.

However heading into Mothers Day weekend, not one Macy’s, Dillards, JC Penney, Kohl’s or Nordstrom store plans to welcome back customers just yet.

“Retailers generally do not make money at 50-percent volume and in fact, they may lose money at 50 percent volume,” said Nick Egelanian, founder of SiteWorks Retail Real Estate.

In a presentation sent to shareholders last week, Macy’s Jeff Gennette, chairman and CEO, explained that for a store to reopen it must be “financially attractive.”

Macy’s which furloughed the majority of its 130,000 employees in March, has announced plans to reopen stores slowly with enhanced cleaning and social distancing procedures.

But Egelanian said not to be surprised if some stores don’t reopen at all.

Retail had already been suffering from increased online competition and over development. The United States has 24.5 sq. ft. of retail space per capita according to Egelanian. Europe by comparison has on average 4.5 sq. ft. per capita.

“This will knock a whole bunch of retail out of commission when we are all said and done,” Egelanian said. “[Green Street Advisors] projected that 50 percent of the remaining department stores would disappear in the next five years, this is before the pandemic hit. They have since updated that and cut it to two years….”

Those who own shops in downtown Edenton, North Carolina, are eager to open up Saturday.

Dr. Denise Barnes, who owns the Venue on West Water Street is adapting her business model to operate under the new regulations. Usually, she operates a destination event center hosting weddings, business meetings, family and friend gatherings.

“We have adapted The Venue on West Water Street around the need for public safety.  We are now specializing in social distancing boutique events,” Barnes said. “If you’d like to host a wedding, the couple, the officiant and a few family members and friends gather on our beautiful patio that is adjacent to the Albemarle Sound.  The event is then live-streamed to friends and family around the world.”

Small businesses have suffered just as much as their corporate relatives. Even with the government created paycheck protection program, many small businesses were left behind.

Egelanian is pushing for the federal government to implement as system Pandemic Business Interruption Insurance to help fend off what could be a significant collapse in part of the retail industry.

He estimates it makes up roughly 70 percent of U.S. economic activity.

“If you have that you can have income that can flow through the retailer and all the other places it goes…it goes to landlords it goes to suppliers and it goes to pay operating costs,” Egelanian said. “I am concerned about the dominos falling in the mid-term…as this drags on.”

 


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