Impacts of Store Closing

A regional department store chain decides to close a former flagship store.  Opened shortly after WWII, this store was once a city landmark, the lone anchor at one of the largest shopping centers in the US.  The community benefitted from tax revenue, employment, and consumer spending while the company grew and prospered.  In the 60’s, 70’s and 80’s, the company followed consumer shopping patterns and built stores in new malls located along major highways as suburbia spread out from the city.  The company remained profitable through the 90’s with a flexible blend of acquisitions, divestitures, restructuring and store closings.  Success in retail today is dependant on customer traffic volume, not markups.  Times change, and the old strip shopping center where the department store was located was now over 30% vacant, while the once solidly middle-class neighborhod was now classed “declining suburbia”, with 3 out of 4 residents in demographic groups that do not patronize department stores.  The decision to close the store was based on these shifting demographics and the company’s brand positioning as a mall anchor.  Prior store closings had received little attention, but this one was different.  Citizen groups protested the closing, claiming that the company had grossly neglected the store, and that after benefitting from the community for over 40 years, the company should return some of that prosperity by reinvesting in the store.  A spokesperson said, “there’s a question here of which came first, the cart or the horse. [They] say they have to close because people aren’t shopping here.  But the store’s a mess…people who want to shop here don’t have a choice”.  For example, a former coffeeshop was blocked off with boards, dirty walls, and duct tape; the ladies’ room had buckets under the sinks.  Civic leaders also objected, saying that closure would significantly impact tax revenues and employment in the struggling community, while reinvesting in the store would spur economic growth.  City council members wondered why the company had not worked with community leadership to make the store utilized and worthwhile, and if the company had examined beneficial government incentives for development.

Ethical Question: The community, over time, has helped make the company economically sustainable.  What – if anything – does the company owe the community to help it become more sustainable?

Ethical Question: What are the relative levels of social responsibility versus fiscal responsibility for the company in closing the store?

This case study was condensed from “The Final Sale” at <a href http://ecbe.slu.edu </a>

Jenny Isler

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2 Responses to Impacts of Store Closing

  1. greenmba2008 says:

    1. I find this a difficult question to answer. I think the company has a responsibility to this community to the length in which the relationship begins to harm the company. I find myself also asking how invest was the community in this store if the store has deteriorated to the conditions described. Ultimately, I do not believe the store has a responsibility to lose money to support a community that helped found it. I think an amiable solution would be for the community to offer tax credits to the store, broker a deal for the store to be purchased by the community, or to develop a plan to develop a shopping district so the store can relocate there with the financial guarantee of other businesses present so the store’s customer base can shop there and other stores of their financial bracket.
    2. Assuming I understand what you mean, the social responsibility is limited. The company should help the employees find employment either elsewhere in the community or at other stores of the company. They also should find a buyer for the store to prevent the store from sitting vacant. The fiscal responsibility is to the shareholders of the company. The store lost too much money to salvage in the eyes of management. Considering the situation described, anything short of gentrification of the area will not save this store in its present location.

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