Dr. Mike Walden

Dr. Mike Walden

Belk sale represents retail revolution

By Dr. Mike Walden
Business Columnist

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It might not be too long before the Belk name is gone from retailing. In August it was announced that the chain was being sold to a New York investment group. Although the new owners immediately said nothing will change, I fear that Belk’s ultimately will disappear as did other family-run department stores.

Begun by two brothers in Charlotte more than a century ago, Belk was an innovator of the department store model. After lean times during the Great Depression, it rapidly grew to more than 400 stores all across the South.

So what went wrong? There are many factors. One is the relatively slow economic recovery. The recession of 2007-09 was, by most measures, the worst since the 1930s. Economists have noticed several resulting trends, including a delay by young people in establishing households, a new frugality, cautious spending and tighter borrowing standards.

Another obvious challenge for any brick-and-mortar store has been the movement to online buying. In two years, 10 percent of all sales will be online, and few experts think it will stop there. The trend calls into question the long-run viability of stores at fixed locations.

The homogenization and nationalization of the economy also has hurt. When it was more difficult and costly to communicate and travel, regional companies with attention to local styles and customs could thrive. Now, with some exceptions, people nationwide have very similar preferences and buying habits. This makes it easier for national companies with giant advertising budgets to compete for the consumer’s dollar.

Any discussion of business trends today must include the millennial generation, born between 1980 and 2000. Now the largest in numbers and rapidly taking over the workforce, millennials have displayed two buying habits that are working against large department stores.

First, they stay longer in school, delaying marriage and having children. Spending from married families with children traditionally was the mainstay of department stores sales.

Second, millennials – like most generations – have liked to establish their own identity and habits. For retail purchases, they have shunned large, impersonal (to them) and conventional department stores for small, intimate and unusual (again, to them) specialty stores.

Last is an issue specific to family owned and operated stores: succession. Research shows less than one-third of family-owned businesses successfully turn over control from the first generation to the second, and another 50 percent of the second don’t accomplish the transfer to the third.

The third generation of the Belk family is currently at the head of the company, but there is no obvious fourth generation successor.

Dr. Mike Walden is a William Neal Reynolds Professor and N.C. Cooperative Extension economist in the Department of Agricultural and Resource Economics at N.C. State University.