COLLEGE STATION, Texas — In a time when people aren’t supposed to be leaving their homes except for essential businesses, retail stores around the world are taking a toll.
Scott Benedict, the director of the Center of Retail Studies at Texas A&M, separates retail stores into three different tiers during this pandemic. The first is essential businesses like grocery stores and pharmacies. The second tier is for non-essential stores that are still functioning as normal.
“Department store chains like Neiman Marcus and others, this could be an opportunity to retrench and reorganize their business operations in varying situations. There’s certainly no negative connotation," said Benedict.
The last tier includes retailers that aren’t doing so well.
"Those that were on the brink of being dead or dying, their business model didn’t really adapt for the customers, they weren’t serving customers effectively. If no one buys them, they’re probably going to liquidate. The only reason we haven’t seen those transactions come to fruition is because you can’t really liquidate right now, because you can’t do away with your inventory, you can’t shut down your stores, you can’t really have going out of business sales," said Benedict.
Once retail starts to open up, these transactions and liquidations can take place.
“I think there will be a group of retailers that don’t survive unfortunately. And they come in all shapes and sizes. Some that are rather large but don’t have enough finances involved, to survive the situation and may be teetering before this happened," said Benedict.
A snowball effect will take place if these retail stores go down. Landlords will not have rent for stores that don’t exist.
“Businesses that aren’t there don’t pay sales tax, they don’t pay property tax so it has an impact on municipalities, local governments where those companies are located, that now are out of business, they don’t generate sales tax, they don’t generate commerce that then drives the economic engines of cities and counties that form these municipalities," said Benedict.
Survival of businesses during this time is also dependent upon the type of product that retail stores are selling.