Back in June 2009, in one of our earliest posts in the aftermath of the financial crisis, we took a “random walk down Madison Avenue” and found empty storefront after empty storefront after empty storefront.
In retrospect, the ghost town that was New York’s “Golden Mile” was not surprising: after all the US economy had just been hit with the worst recession since the Great Depression, and only an emergency liquidity injection of trillions of dollars prevented a global financial collapse.
It is my sincere desire to provide readers of this site with the best unbiased information available, and a forum where it can be discussed openly, as our Founders intended. But it is not easy nor inexpensive to do so, especially when those who wish to prevent us from making the truth known, attack us without mercy on all fronts on a daily basis. So each time you visit the site, I would ask that you consider the value that you receive and have received from The Burning Platform and the community of which you are a vital part. I can't do it all alone, and I need your help and support to keep it alive. Please consider contributing an amount commensurate to the value that you receive from this site and community, or even by becoming a sustaining supporter through periodic contributions. [Burning Platform LLC - PO Box 1520 Kulpsville, PA 19443] or Paypal
-----------------------------------------------------
To donate via Stripe, click here.
-----------------------------------------------------
Use promo code ILMF2, and save up to 66% on all MyPillow purchases. (The Burning Platform benefits when you use this promo code.)
What is more surprising is why nearly 9 years later, at a time of what is supposed to be a coordinated global recovery, a walk along Madison Avenue reveals the exact same picture.
But don’t take our word for it: here is Starbucks Executive Chairman Howard Schultz speaking during the company’s annual general meeting on Wednesday, and making some stunning observations.
From the transcript:
… let me shift just quickly into the business a bit and what’s going on in terms of the seismic change that we’re all witnessing in terms of consumer behavior in Retail.
No, I wasn’t clairvoyant three years or four years ago, but I did notice something and you didn’t have to be a genius to figure it out that the e-commerce effect of things was going to have a dramatic effect on people physically shopping for goods and services. And that has resulted in a tremendous level of compression in terms of the amount of retailers that are serving customers today because less customers are coming into their stores and that has resulted in unfortunately many, many stores national, regional, and local going out of business.
Now this is a photo as you can see of a mall that is very, very busy with people shopping for goods and services. Unfortunately, that was then, this is now. And it’s a dramatic change. And what it means and you saw this today and what we’ve tried to present to you is that we’ve got a push for reinvention and innovation and we have to do – everything we can to become a primary destination.
Now, as a result of what we’re witnessing, we’re also seeing something else and that is, there is a proliferation around the country right now of empty storefronts. We took a walk in New York two weeks ago from 59th street to 79th on Madison Avenue, and we lost count of how many empty storefronts there were in Manhattan. It reminded me of the cataclysmic financial crisis in 2008. But what’s happening is very simple, the rent structures for the last 5 to 10 years, have been rising at historic rates and retailers do not have the amount of customers they had during these last 5 to 10 years and could no longer economically survive.
So they’re closing stores and as a result of this, I can promise you just like I predicted in 2014 that rents are coming down and landlords are going to have to get religion, or else their stores are going to stay empty. And we’re already beginning to see a different level of reception in terms of what we believe the cost of occupancy should be. And this is going to bode extremely well, specifically for us. We’re adding almost 700 new Starbucks stores a year. And so we are going to take full advantage of the economic reality of this situation. And as we go forward two, three, four, five years out even though labor is going up in terms of cost of labor, we believe rents are going down and the economic model of Starbucks is going to be enhanced as a result of this macro situation. And we’re just at the beginning of this trend.
In other words, if 2017 was the year the “retail bubble burst” as Urban Outfitters CEO Richard Hayne said one year ago, 2018 will be the year when not only the retail sector slides into purgatory, but the deflationary shockwave that is being unleashed as rents finally hit a brick wall, will lead to the next, and far more violent crash in commercial real estate, and the hundreds of billions in debt that prop it.
Don’t believe us? Just take a walk on Madison between 59 and 79th…
If you want normal economic development and normal long term expansion of it, it’s foolish to prop up segments of it that can no longer sustain themselves on their own merit.
Fuck the ” Golden Mile ” or Madison Avenue “. I’m just as disgusted with Madison Avenue as I as Washington DC.
Agreed. NYC and DC comprise two of the three members of the real axis of evil. The state of CA being the third (at least Hollywood and Silicon Valley).
Seeing the same thing in suburban St. Louis. I suspect it is the same in most places. This is not looking good. What are other TBP people seeing in their cities?
So explain to me why I need to get off my couch; find my keys; go to the car; fight traffic; get to the mall; find a parking space; walk inside with a mob of surly, grouchy people, just to buy some object or another when I can simply turn on my iPhone, and order one and have it delivered in a short period of time?
Retail from a bricks & mortar store is done.
Sales is not.
Retail is.
Adjust accordingly.
Most of the time I go to the mall they don’t have what I’m looking for. Walked into one shop and saw some light colored jeans, all sold out except sizes 4, 6, and 16. I’m not anywhere near those. Went in to try on a girdle (for back support, I occasionally throw my back out), no one carries them, not even JC Penney’s anymore. The grocery store is regularly out of the milk I like as well as other products. Half a dozen shoe stores in the mall, no one carries the size I need.
So (((Schultz))) is telling other members of the tribe to “get some religion “ and lower prices? Fat chance of that happening!
I can remember before the advent of the mall, and what happened to the downtown where I lived when the first one opened. I’ve been aware of the decline of malls, which I consider inevitable, for some time and have been pondering the effect of it on how people will live their lives. One thing is for sure, people will have to do their gathering in places other than malls, which I consider a good thing. Perhaps down towns will make a comeback, not necessarily as places of commerce, but of community. It would be nice to see people moving about without shopping bags on their arms.
Door to door drone delivery should take care of all needs for all.
We are probably entitled to our personal delivery drone.
At least when the pizza delivery drone gets robbed, no one will get killed.
At least until it is legal to arm them, and then the robbers might be at risk.
You hear about greedy landlords, but almost never about the jacking up of property-tax assessments that landlords are having to pass through. Are the tax guys going to lighten up?
Nailed it Celtic Tiger , property taxes , utility taxes and rates force lease rates up . Add to that the Circle Jerk that is Wall Street to K-Street to Capitol Street plus the liberal limo leftists in California whose attitudes and policy desires negatively affect everybody but the ultra wealthy and poor economic social mess average people are left to deal with day to day !
As for my area every strip mall and major shopping mall complex has numerous retail space available signs and the anchor stores hanging by a thread Macy’s , Sears , J.C. Penny and so on ! I am told I am Mr. Doom and Gloom , it sucks to be a realist . Many people would argue the unsinkable Titanic ignoring the fact they are in water up to their collective asses .