In The News

Solari: The Great Retail Reduction and what it means for Northern Nevada

Mar 6, 2017

This post was originally published in the Reno Gazette Journal and can be found at this link. 

http://www.rgj.com/story/money/business/2017/01/20/solari-great-retail-reduction-and-what-means-northern-nevada/96855000/

Brick-and-mortar retail stores are going through a prolonged contraction — one that will shrink both the number and size of storefronts across the nation over the next decade. This trend is having far-reaching effects on everything from employment and sales tax revenue to commercial real estate and construction. And Northern Nevada, like the rest of the nation, will see the ripple effects of these changes.

 

Store closures have hit RadioShack, Sears, J.C. Penney, and most recently Macy’s — which announced 68 store closures this month. Some analysts estimate that the nation’s overall retail square footage will drop by between one-third and one-half over the next five to 10 years.

 

The retail industry is not simply going through a reduction; it is more of a reshaping. Consumers are more discerning in their expectations of the brick-and-mortar retail experience and looking for new avenues to purchase. Consumers want the convenience of the digital experience even during physical, in-store shopping.

 

Much of the online opportunity has been seized by large online retailers like Amazon, which house distribution hubs and online fulfillment centers in Northern Nevada. But ample opportunity still exists for other smaller retail innovators. These new stores often follow the overall trend of smaller storefronts while reimagining the traditional in-store experience.

 

The shrinking footprint of retail in downtowns and suburban shopping centers across the nation raises some unanswered questions for municipalities, employees and property owners as this retail transformation accelerates. Much of our tax revenue, employment and real estate models have been built around a brick-and-mortar-based retail industry. That is changing, and we have to ask ourselves how communities like Reno will evolve to keep pace with the change. Fortunately, a rebounding economy and strong consumer demand has masked a lot of these effects in Northern Nevada, resulting in an overall decline in retail vacancies.

 

But just as the retail industry is adapting to a business that is moving online, communities will have to think long-term and plan to adapt to changes that threaten to leave some empty storefronts and lower sales tax revenue in its wake.

 

Some communities will find other opportunities — for instance, social marketing, professional services and distribution. And other businesses will transform into premium or boutique outlets that are more personal, unique and customer-service-oriented than in the past. We have already seen a strong “local” movement that celebrates local and focuses on clothing, crafts, art and food — items that can’t be replaced by large online retailers. Those establishments may even thrive as they couple a unique local retail location with a niche national online audience.

The changes will drive innovation in brick-and-mortar retail, forcing stores to be more engaged with their customers, and offer in-person events and in-store experiences that online retailers can’t provide — all great developments for the consumer.

 

But in the end, the retail landscape that has been dominated by malls and large storefronts will look different in the coming years. And communities, businesses and consumers will work to adapt to this new retail reality.

 

John Solari is the managing partner of J.A. Solari & Partners. He has 25 years of accounting experience and is also a member of the American Institute of Certified Public Accountants and the Nevada Society of Certified Public Accountants.