Retail resilience: Duluth's large retailers proving immune to national decline
If Sears and Kmart continue closing locations around the country and are reduced to just one store each, you'd probably find them in Duluth.
Legacy retailers here have remained resilient even as headlines herald a dire story elsewhere. Miller Hill Mall is nearly full, lists of corporate closures rarely include Duluth, and since 2008 the area actually saw a net gain of one retailer with more than 20 employees.
The secret to that stability, one expert says, is people and their money.
"From the '90s until today, Duluth has had a very steady population. That is key in retail," said Bruce Nustad, president of the Minnesota Retailers Association. "The other thing you see in Duluth is from 2000 to 2015 median household incomes increased, putting more disposable income into the economy."
Across Northeastern Minnesota, retail is projected to be the most stable employer, with the Department of Employment and Economic Development anticipating a loss of just 0.4 percent of retail jobs through 2024. That comes despite online sales now comprising one in every 10 dollars spent on retail in the U.S.
"Retail sales, cashiers, stock clerks and supervisors are still projected to be the top occupations in retail," said Erik White, DEED's regional labor analyst. "One consistent within retail trade is customer service."
Yet while chains and established brands are hanging on, small retailers seem to have borne the brunt of the digital disruption. In the past decade, 163 retailers with fewer than 20 employees have closed in St. Louis, Carlton and Douglas counties. That's a 14 percent drop in the number of small retailers in the area.
"Retail is clearly evolving, and with any evolution there are winners and losers," the National Retail Federation's vice president of research, Mark Mathews, wrote this summer.
Big wins, small losses
A weekend visit to Miller Hill Mall usually means competing for a parking spot — not something every regional shopping center can hang their hat on anymore.
"Not all malls are doing perfect, but there's one that's holding its occupancy really nicely," Nustad said.
As opposed to denser clusters of commerce in American suburbia, it seems Duluth's position at the end of the road helps make the case for keeping the doors open on stores that are shrinking their national footprint.
"Using Macy's as an example, the majority of their stores slated to close this year are within 10 miles of another Macy's location," said Katie Kaz, Miller Hill Mall general manager. "One likely reason why Duluth has experienced fewer closures is because there are typically only one of each retailer in the region, and that's good for business."
It's not just the geography, stable population and rising income that helps Duluth's big retailers — it's culture, too.
"Duluth is a special place with a strong sense of community, and consumers are more likely to shop at a retailer that recognizes them by name," said Randall Jackson, the mall's director of marketing and business development. "All of our retailers may not be considered local, but the 1,800 employees who work here are."
Nustad agreed that the push toward experience-based retail plays into Duluth's reputation for an experience-based place to visit (and spend money).
While all of this goes a long way for companies with a lot of capital to back them up in the fight against Amazon and other online outlets, small retailers are getting squeezed out. There were 1,112 retailers with fewer than 20 employees in the region in 2008; in 2015 that number was 949.
"What the industry is probably going through is not only do you have to work in a physical space, but there's also an opportunity online — and what's the best way of marketing products in that environment?" White said.
For the big brands, local stability is welcome in the face of decline elsewhere, but the impetus of business is to grow.
"We don't see a lot of downswings, but the downside is we don't see a lot upswings either," Nustad said.
The fact that retail employment in this part of the state isn't expected to grow or shrink noticeably is testament to that. Statewide, too, retail is expected to grow just slightly through 2024, DEED says.
A number of new ways of doing business could upset that stable outlook, just as merchants were caught off-guard by the rise of online competition — Sears this year alone has closed over 200 stores as a result. Then again, White mused, are drones going to be making daily deliveries in Grand Marais anytime soon?
"It's not to say there aren't going to be changes that occur with technology — it's hard to predict how eventful or disruptive a certain technology would be," he said. "Projections tend to fall on the safe side."
Nustad is the state's foremost retail booster, so it's no surprise he's remaining optimistic on the fate of the industry here. But he derives some of his hope from the very people said to be killing brick-and-mortar businesses.
"You look at generational pockets, and Generation Z loves their mobile devices and ... tend to be good store shoppers, which seems counterintuitive."