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Old 07-23-2008, 08:51 PM
 
Location: Orlando, FL
12,256 posts, read 16,201,261 times
Reputation: 6610

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I try to watch the news, read the paper, be informed, etc...but there is just one thing I don't understand about the current state of the economy.

And that's all the retail chains closing.

There was a big news story here a few days ago because they're closing about 20 local Starbucks and the people are just being laid off, not reassigned to other stores.

Now in my mind I really don't think Starbucks is really hurting financially, so it doesn't seem logical to me to close the stores. Closing the stores means we'll have more buildings sitting empty, which in Orlando quickly causes a problem as homeless people take residence in them, and more unemployed people. And obviously there aren't that many jobs since unemployment benefits were just extended 13 weeks...so now there are even less people making money that might have spent buying coffee. It just doesn't make sense to me...

I won't even pretend to be that knowledgeable in economics but I just don't understand how this huge retailers figure they'll save money by closing stores and laying off all their employees - if no one's working, who's going to shop?

Can someone give me the 3rd grade explanation of how this works?
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Old 07-23-2008, 08:57 PM
 
48,516 posts, read 83,890,268 times
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It is very easy for a reteil sales compay to go from profit to losses when sales drop.Look at same stores sells and that wil give you your answer.Sales is everyhting in retail sales and can drop pretty quickly.That is when they need to cut back on expenses to keep in business.As far as buildingsmost companies either lease or they else from a company they own for tax purposes. Leaving a building empty is cheaper than paying the cost of running it since it is a expense write-off.
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Old 07-23-2008, 09:00 PM
Status: "\_(ツ)_/" (set 11 days ago)
 
11,378 posts, read 5,959,413 times
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Many chain retail stores are over extended...they have way too many stores in a small radius, starbucks being one of the big offenders. But where I live there are 3 Best Buys 5 - 10 miles away (estimate)
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Old 07-23-2008, 09:09 PM
 
Location: Sacramento
13,784 posts, read 23,800,954 times
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Business cycles and changing tastes. Many chains have closed throughout history. Growing up in Philadelphia 40 plus years ago we would go downtown or to the large suburban centers and shop at Gimbels, Lit Bros, Wanamaker, Strawbridge & Clothier and Hess's Dept stores. For bargain shopping we would go to EJ Korvettes or Sam Kleins. All of these no longer exist, with some closing over 30 years ago.

More recently (about 1980), I lived in Cleveland for a couple of years. Their major department stores were Higbees, Halle's, Joe Horne, and May Co. All of these are gone too, and have been for some time.

It isn't just struggling cities, when I lived in the DC area in the 1980's and early 1990's, their major department stores included Garfinckel's, Woodward and Lothrop, and Hecht's. None exist today.

Oh yeah, I used to pick up supplies for my minor home construction projects at either Builder's Square or Hechingers, neither of which have existed for the past 10 years.

It isn't a recent phenomenon.
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Old 07-23-2008, 09:18 PM
 
19,183 posts, read 28,371,569 times
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Starbucks will be closing some 600 US stores in response to an economic downturn that has seen people cut back on some luxury items, a trend that has made many of their retail outlets unprofitable. The company is still proceeding with 300+ new US store openings planned for the coming year. It is simply cutting out stores that didn't perform as expected or whose service area can be served by a nearby outlet. Some staff from affected stores will be reassigned...most will simply be let go. Some 12,000 jobs should be cut by next March...about 7% of Starbucks total workforce. Florida and California will be the two hardest hit states in these closings...
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Old 07-23-2008, 09:22 PM
 
Location: Orlando, FL
12,256 posts, read 16,201,261 times
Reputation: 6610
Quote:
Originally Posted by NewToCA View Post
Business cycles and changing tastes. Many chains have closed throughout history. Growing up in Philadelphia 40 plus years ago we would go downtown or to the large suburban centers and shop at Gimbels, Lit Bros, Wanamaker, Strawbridge & Clothier and Hess's Dept stores. For bargain shopping we would go to EJ Korvettes or Sam Kleins. All of these no longer exist, with some closing over 30 years ago.

More recently (about 1980), I lived in Cleveland for a couple of years. Their major department stores were Higbees, Halle's, Joe Horne, and May Co. All of these are gone too, and have been for some time.

It isn't just struggling cities, when I lived in the DC area in the 1980's and early 1990's, their major department stores included Garfinckel's, Woodward and Lothrop, and Hecht's. None exist today.

Oh yeah, I used to pick up supplies for my minor home construction projects at either Builder's Square or Hechingers, neither of which have existed for the past 10 years.

It isn't a recent phenomenon.
I can understand some stores - Winn Dixie's have been steadily closing here for several years now because they're stores aren't as consumer friendly as Publix or Albertsons - but recent closings in my area are Toys R Us, Bed Bath & Beyond, Linen and Things, Kohl's, Lane Bryant, Payless. I doubt these stores are going to completely go out of business is the next few years so I don't understand the drastic need to close. I have noticed though it's usually ones that are set off by themselves and not inside a mall or they are the main store in a shopping plaza.

I agree that a lot of these places were built way to close to each other but is the economy really that bad right now that they just all close down? On my way to work I pass by like 3 or 4 plazas that look deserted now because the anchor stores have closed down and there's only little filler stores like pizza places and nail salons, which will eventually close because there's no business coming in.

At this rate we'll just be left with Wal-mart
I guess I'm just looking at it from the wrong perspective. I am not at all business savvy.
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Old 07-23-2008, 09:34 PM
 
28 posts, read 60,935 times
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First, Starbucks is really selling a luxury product. In an economic downturn, the things people cut back on first are luxury items. Do you really want to pay $3.50 for a cup of coffee if you can get one at the 7-11 for a buck? Some still do, many probably don't.

Second, Starbucks stores had started to cannibalize each others' sales in some cities. I don't know what it's like in Orlando, but where I work there are 5 or 6 Starbucks stores within a half mile radius. Once you have that many stores, you really don't sell a lot more coffee, store B will just sell what store A would have sold if store B didn't exist. So sales might be 10% less if you didn't run store B, but costs are almost twice as high to keep A and B open rather than A alone. A huge part of their costs isn't really the coffee, it's the people, it's the rent, etc.
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Old 07-23-2008, 09:56 PM
 
Location: Sacramento
13,784 posts, read 23,800,954 times
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Don't forget the impact of the internet, though it wouldn't impact Starbucks it certainly has had impact on stores selling clothes, electronics or toys.

Last edited by NewToCA; 07-23-2008 at 10:36 PM..
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Old 07-23-2008, 10:00 PM
 
Location: Charlotte, NC (in my mind)
7,946 posts, read 15,038,856 times
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Quote:
Originally Posted by NewToCA View Post
Don't forget the impact of the internet, thought it wouldn't impact Starbucks it certainly has had impact on stores selling clothes, electronics or toys.
Especially electronics and toys. Newegg killed CompUSA and devoured its body. Circuit City is soon to be next.
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Old 07-23-2008, 10:31 PM
 
Location: At my computador
2,057 posts, read 3,089,685 times
Reputation: 510
Quote:
Originally Posted by natalayjones View Post
There was a big news story here a few days ago because they're closing about 20 local Starbucks and the people are just being laid off, not reassigned to other stores.
You're seeing why it's called a rat-race. During good times, you have to get in and make as much as you can before the next slow down. When the slow down hits, the best keep chugging while the weak die.


Quote:
Now in my mind I really don't think Starbucks is really hurting financially, so it doesn't seem logical to me to close the stores. Closing the stores means we'll have more buildings sitting empty, which in Orlando quickly causes a problem as homeless people take residence in them, and more unemployed people.
If you had five pairs of running shoes, wouldn't you stop wearing the ones that don't fit right?

The stores that are closing aren't performers.


Quote:
And obviously there aren't that many jobs since unemployment benefits were just extended 13 weeks...so now there are even less people making money that might have spent buying coffee. It just doesn't make sense to me...
I gather that you're implying that by employing people, they are able to sell to those people... It's reminiscent of some of the things the union reps used to tell us. There's a round-about accuracy in it, but it's an oversimplification... and it's in the simplification that the logical connection is lost.

It's not that the people making coffee will buy coffee-- What matters is that the people making coffee buy other stuff. The people making the other stuff will then buy coffee. However, in order for the people who make other stuff to be willing to buy your coffee, the coffee-makers have to have a desirable product-- cheaper, better, etc.

In Starbuck's case, the people making other stuff stopped buying because the coffee no longer met their needs.

In regard to empty stores, that's a statement about over-production of buildings or a lack of innovation (or motivation) from members of the community.


Quote:
how this huge retailers figure they'll save money by closing stores and laying off all their employees
Redirecting resources to real performers (or potential performers) is one way. Pulling the good managers who might have been stuck with real dogs of stores and putting them in different positions (and canning bad managers).

What it boils down to is this (using arbitrary numbers): SB has 100 stores. 80 perform as expected. 10 perform twice as good as expected. 10 perform half as good (even losing money). You want to improve your over-all numbers, so you kill the ten under-performers and open ten new stores elsewhere. Or, maybe you kill them and take the money that you were losing (or the money from selling the stores assets) and pay it toward debt.


I think that's the gist of it.
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