After Shopko: Can local businesses fill the void?

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On June 16, Powell’s Shopko will close its doors for good. With the company’s collapse, many shoppers throughout the Big Horn Basin expect they’ll have to drive to Billings, Cody or further to buy socks, sporting goods, household items and electronics — or just buy them online.

However, the Wyoming Business Council, Powell Economic Partnership and others are developing a plan to help existing local businesses and new entrepreneurs in the community satisfy the retail vacuum that will follow the Shopko closures.

Shopko’s strategy filled a niche retail market, offering not-so-big box outlets in cities that were too small for the larger outlets, like Wal-Mart. Residents of these rural communities often had to drive long distances to buy department-store products. Shopko expanded not that long ago, but it ultimately collapsed.

In its bankruptcy announcements, the company cited pressure from online retailers as a primary cause for its financial difficulties.

There are a number of challenges to face if local businesses are to fulfill Shopko’s niche, including the same competitive pressures from online sales. While it’s a popular narrative to believe brick and mortar retail will be replaced with online sales, it could be an exaggeration. Most estimates show about 91 percent of all retail sales last year were made inside a physical store.

Coresight, a New York-based market research firm, counts 5,399 retail store closures and 2,396 retail store openings so far this year. While that sounds like the death of the physical store, a closer look at the numbers shows that’s true only for certain sectors. While sales of music, books and games have moved almost entirely out of the brick and mortar world, groceries are only about 1 or 2 percent of online sales. And warehouse clubs, dollar stores, and gas stations are growing; TJ Maxx, Costco and Dollar Tree all plan to open stores this year.

E-commerce is growing quicker than physical stores, but in five years, online purchases are still expected to be no more than 20 percent of all retail sales. Most shoppers still prefer to physically touch most of the merchandise they purchase.

So there may be potential for local businesses to satisfy some unmet consumer demand. However, proponents of this idea are not under any illusions about what small retailers are up against.

“Retail in rural America is tough,” Christine Bekes, Powell Economic Partnership CEO, said at a recent advisory meeting.

 

No magic bullet

Amy Quick, regional director for the Wyoming Business Council, said local retailers have strengths that make them competitive with online shopping.

“We can focus on quality of life and quality of experience. You can’t get the same experience online as you can in the mom and pop store,” Quick said.

For example, the online checkout page has no friendly smile from the woman at the register whose kids go to the same school as the customer’s. Quick said that kind of relationship building, which can’t be replicated online, can go a long way toward solidifying customer loyalty.

There are also opportunties in the products local retailers decide to sell.

While brick and mortar stores are not generally as convenient as clicking on a webpage, some products are not easily purchased online. And while purchases can almost always be returned, it’s hugely inconvenient to do so. For instance, shoppers can’t try on a pair of shoes before buying online, and sampling several pairs of shoes one UPS delivery at a time would take weeks.

Last week’s PEP advisory meeting was attended by representatives from several Powell retailers, and they had a lot to say about where opportunities and challenges lie as Shopko’s closure approaches.

Wade Myrick, store manager for the Powell Shopko, offered some insight based on his own experience working in retail. The community has a lot of potential, Myrick said, but “I can’t give you the magic bullet.”

He said Shopko’s strongest sales were often in seasonal items, like holiday candy. He said the store would “move pallets” of candy soon after it put them on the floor.

“We got into the season and out as quickly as possible,” he said.

It wasn’t just the holidays, either. When Northwest College freshmen started coming into Powell to begin their studies in the fall, small refrigerators and microwaves would fly off the shelves.

“We know when mom and dad are bringing the kids the first weeks,” Myrick said.

Plus-size clothing, athletic shoes, and sporting goods also had solid sales volumes, he said.

 

Where to go?

The Wyoming Business Council has contracted with the Chicago-based National Main Street Center to help guide local businesses toward better retail outcomes.

Quick and Bruce Morse, regional director for the Wyoming Small Business Development Center Network, held a series of listening sessions this month in Worland, Greybull, Powell and Thermpolis. They gathered input from residents, business owners and local leaders on how the loss of Shopko will impact shopping and what challenges local businesses face in satisfying the communities’ retail needs. The input from those focus groups — along with surveys and research from the University of Wyoming — will culminate in a free, public webinar on June 6. Quick said the report will identify existing gaps and opportunities for business expansion or creation.

Morse said small businesses need to tap into online advertising more. Although they’re not trying to compete with Amazon or even sell their products online, the web is still a resource for smaller retailers.

“They can play in that world. ... They can still have an online presence,” Morse said.

He said it’s especially important to help local residents know where to find what they want to buy. Online sales make up a small portion of total retail sales, but a large volume of sales at physical stores are digitally initiated. In other words, people look online for what they want before they go to the store to buy it. All too often, local merchants don’t think their websites are important or need to be maintained. If shoppers go online to find what they need locally and come up blank, Amazon is just a click away.

The PEP meeting highlighted the problem of shoppers not knowing where to find what they’re looking for across town. Ace Hardware Manager Jerry Jackson said they’ve been carrying fish, aquariums and accessories for years, but he still has people surprised to find them in the store.

Besides the difficulty in diversifying Ace’s goods — how many people would buy Valentine’s candy from a hardware store? — Jackson commented on the lack of space: Ace carries over 34,000 items, packed into their 11,000 square-foot store.

Curt Scott, manager of Murdoch’s, said they are also diversifying their inventory, but it’s a slow process. The company, which took over Linton’s Big R earlier this year, is looking at expanding clothing offerings and adding children’s toys, among other things. But like Ace Hardware, space is an issue.

“We’re still kind of in that gray area, because there’s only so much room in that building,” Scott said. 

Shopko’s 25,000 square foot building will go up for sale, and it’s not tied up in the company’s ongoing bankruptcy case. It’s uncertain if another retailer will be interested, but Myrick said they have received interest from out-of-state buyers; Jackson said there were a number of reasons why a move is not feasible for Ace.

 

Untapped sales?

As locals look at ways to address the loss of a major retailer, Scott noted the sense of community in the discussion.

“It blows my mind to hear that, to hear businesses come together,” he said. “It’s pretty amazing.”

Myrick suggested that if local merchants can connect with shoppers, there may be a lot of untapped sales; he said there were often Shopko customers asking for items they couldn’t find in the store.

“There’s not a day that goes by that we don’t refer people to downtown,” Myrick said.

After June 16, there’ll be a lot of shoppers looking for things they used to buy at Shopko. If they know they can find what they want within a few miles of home, that’s probably where they’ll go.

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