The Week Here: Where’s the Money?
24 Apr 2020
This week’s review looks at the headlines dominating retail: from the demise of the department store to the problem with Darwin and the struggle for financial aid.
Darwinism and Department Stores.
The crisis is speeding up the demise of the traditional department store. Bankruptcy is looming for The Neiman Marcus Group, one of the biggest players in the U.S., and other chains are in dire straits. “The genre is toast, and looking at the other side of this, there are very few who are likely to survive,” said Mark A. Cohen, Director of Retail Studies at Columbia’s Business School, in The New York Times.
Mary Portas, took the debate further in a piece penned for The Financial Times, declaring in Darwinian fashion that “average is over. Mediocrity is out the window … the bland, the dull, the middle-of-the-road merchandise – forget it. The retail businesses that will survive, the ones who will come out with a deeper connection to their followers … are those with hard-earned brand equity.”
Portas spotlighted rising designer Telfar Clemens as a shining example – pointing to strong first quarter sales – while leaving out the fact that the independent brand’s upcoming collaborations have been postponed indefinitely, and that they, like so many other vibrant small businesses, face financial hardship and a collapsing system.
The notion of “survival of the fittest” discounts the butterfly effect of the chaos brought about by a global pandemic: a wedding is cancelled in the Catskills and roses are destroyed at a flower farm outside Nairobi. It’s not a question of strength, it’s a question of capital. There will be countless enterprises who go under, not due to lack of brand equity, but because of the hard reality they face when consumers are holding their breath and there is no money left in the bank.
The Numbers Keep Coming.
To alleviate the financial burden, U.S. Congress passed a second aid package, with $310bn earmarked for small businesses – whose employees represent 47% of the national workforce. The first round of $349bn funding has already run dry – leading to public outcry about banks prioritising their largest customers.
Small businesses are what give a city’s neighbourhood their character. Of New York’s 200,000 enterprises, 89% have teams of fewer than twenty people. “In my network, not one of them got the money,” said Nichelina Mavros, co-owner of Dépanneur in Williamsburg. Mavros’ network reads like a roll call of Brooklyn’s entrepreneurs, from The Narrows bar to the creative collective The Windmill Factory.
Molly Neitzel, founder of Molly Moon’s Homemade Ice Cream in Seattle, told Bloomberg Businessweek: “It’s the craziest amount of limbo I’ve ever experienced” – describing the process of navigating maze-like federal loan programs. Since its establishment over ten years ago, Molly Moon’s has become an Emerald City institution; flourishing while giving back to its community – from partnering with local farmers to donating supplies to food banks.
It’s All The Same Story.
Across the pond, some details of the UK Government’s Coronavirus Business Interruption Loan Scheme have been left to the discretion of lenders – including requiring personal guarantees for certain loans. “Many small brands are reluctant to even look at the loans at this stage as they are concerned that they might not have a business at the end of all this,” said Adam Mansell, Chief Executive of the UK Fashion and Textiles Association, in Business of Fashion, with those seeking aid “finding accessing the scheme incredibly difficult.”
The British Retail Consortium and the British Property Federation have signed an open letter to the government seeking additional relief measures, warning that the survival chances of the country’s high streets are “now being measured in weeks rather than years.”
“It feels like it’s been months already, but it’s only been days. Each day is the longest thing ever, I sit there just staring at our bank account,” said Peter Creed, co-owner of The Bell Inn, a gastropub in Gloucestershire.
“It’s not just losing your cash; it’s losing your people who are the heart and soul of your business,” said Jill James, owner of small business consultancy Sif Industries, in the LA Times. The argument is not that an employee of an independent is more deserving than one of a retail chain. The crucial difference is access to resources.
Just imagine, if you can, our cities without independent shops and restaurants. A village, a town, a city – no matter its size – is an ecosystem. Its biodiversity is critical. In preserving our small businesses and the entrepreneurs behind them, we preserve the meaning of community.
Words by Amy Tai, creative consultant and native New Yorker now based in London.