Online retailing spells the end for American malls but is breathing life into the Rust Belt

Thanks to new websites and warehouses, a town in Pennsylvania is on the up. And WeWork just may breathe life into struggling Lord & Taylor

David Usborne
Saturday 28 October 2017 14:49
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Macy’s and other established retail shops are closing by the dozen
Macy’s and other established retail shops are closing by the dozen

When Bethlehem, Pennsylvania, with its crumbling steel mills and sundered chimneys, becomes a symbol of economic lift-off you know something seismic is happening in America. You know it too when Lord & Taylor, one of the country’s most storied department stores, sells its Manhattan flagship to a cocky startup company offering shared workspace to millennials.

We are in thrall of a world changing at lightning speed, thanks largely to that thing we once called the world wide web. We love the many conveniences it gives us. “Alexa, write this column for me.” (If you haven’t asked Alexa or one of her competing voice-command friends into your home yet, you really should.) But some of the economic fallout from it we like much less.

We worry, notably, about how online living – and shopping – has compounded the difficulties so many communities face keeping jobs nearby for the families that live in them. Woe is the American retail sector for example. Shops – you know, the Are You Being Served? kind with real people inside and real things to buy – are vanishing in America faster than the leaves in autumn.

We all see it. I do, just around my home in Manhattan. The “Retail Opportunity” posters inside the glass of our old supermarket are starting to fade. Same at the old Polo Ralph Lauren shop in the building The Independent works out of. But try going beyond the big cities. It’s worse. Since the start of this year, retailers have announced plans to close 6,700 shops across the country. They have names like Sears, JCPenney, Ann Taylor, Gap, Banana Republic, Gymboree and Staples.

Shops like Sears and Macy’s are almost national institutions.They and a few other household retail names became the anchors around which shopping malls were built. Families flocked to them in their cars and so American suburbia was born. How many Macy’s have just been slated for closure? About one hundred. According to bankruptcy.com, about 300 retail businesses went bust just between January and June of this year.

Yet this narrative is more complicated than at first appears. And less gloomy. It isn’t just about the old giving way to the new. Or labour-heavy industries giving way to labour-light ones. Look more closely and the old models of doing business and the new ones are sometimes starting to mash together. They are colliding in ways that are producing new and unexpected energy.

Look at Bethlehem. Just 85 miles west of New York City, it for ever embodied the crumbling of manufacturing. The fabled mills of Bethlehem Steel once employed tens of thousands, provided the girders of the Golden Gate Bridge and the amour-plating for Eisenhower’s tanks. By 2002, it was all over. Bethlehem joined the vast wilderness they called the American Rust Belt.

And now? Stirring again, not because steel is back in vogue, but because online shopping has arrived. The city is in the heart of two counties through which flows the Lehigh River and, more importantly, Interstate 78. Companies like Amazon in the front lines of online-retailing chose it as the perfect strategic spot to build urgently needed distribution warehouses. With them have come jobs too, most paying more per hour than people in shops are used to. In seven years, warehouse jobs in those two counties alone have tripled from 5,000 to over 15,000. A similar boom in warehouse building and warehouse staffing is occurring in counties across the land.

One online retail company, Zulily, has gone a step further in Bethlehem. As The New York Times reported last week, it has taken over a portion of the old Bethlehem Steel Mill complex – grand and, until recently, abandoned monuments to old industry in deep red brick – to house its newest, eastern seaboard distribution centre. Inside are pickers, sorters, IT managers and fork lift drivers. To Bethlehemites those buildings were a graveyard where high-wage jobs lay. Few ever imagined they would be applying to work there again. All that’s missing is the grime and black smoke.

Large sinkhole opens up in a Pennsylvania neighborhood

Will Zulily be there long? Will its workers? That’s a good question as the next big revolution will be about robots replacing humans. But you have to take notice of the Bethlehem story. As you do the unexpected tango of old and new going on at Lord & Taylor.

At one level, it’s quintessential old-guard surrender. Lord & Taylor is an institution in trouble also. Around for over a hundred years, it’s Manhattan mainstay – a landmarked building on Fifth Avenue – pioneered the tradition of Christmas window displays. But its owner, Hudson’s Bay Company of Canada, is dealing with the same pressures as everyone else: jobs and square-footage must go. The $850m (£647m) it got for the building will help pay down debt.

That the buyer was WeWork said it all. The Silicon Valley startup has been snaffling buildings in cities everywhere to cater to millennials who don’t want to commit to an office of their own but don’t want to work from home either. Typically, a WeWork location offers individual office spaces of varying sizes across a shared floor with common areas for flirting, networking and free beer on Fridays. The Lord & Taylor building is going from gussets to gizmos. In fact, WeWork plans to turn the building into its headquarters.

But Hudson’s Bay thinks it isn’t surrendering but being clever. It will continue to lease the bottom two floors of the building and by having WeWorkers upstairs they are hoping to solve one of their greatest conundrums: how to get millennials interested in what they offer. Now they’ll hold them hostage as they virtually traipse their way to their desks through lingerie and cosmetics. Morning, Mr Humphries.

And you never know, maybe one of the wizz-bang-smart WeWork crew will help Lord & Taylor build a decent and attractive website. So it can thrive in this brave new world.

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