In the Know: Alexandria is a leader in retail
Over the last year, there have been a number of retail companies who have closed their doors in the Alexandria area, and these closures have caused concern in our community. Ultimately, our location is not unique to this trend. Nationally, the amount of retail space going dark in 2018 is on pace to break a record, as companies with massive floorplans are either trimming back their store counts or liquidating entirely. Research shows that across the U.S., retailers are set to vacate more than 90 million square feet of retail space in 2018. This new number comes in the wake of department store chain Bon-Ton being forced into liquidation. RadioShack, Payless ShoeSource, and Toys "R" Us have also filed for bankruptcy protection.
This shift is likely to have a profound impact on the U.S. economy. The retail industry is the largest private employer in the U.S., according to a study conducted by PricewaterhouseCoopers for the National Retail Federation. Retail trade employs close to 300,000 in Minnesota alone, while nationally, it directly and indirectly supports nearly 42 million jobs.
And although these closures are a change to our community, it doesn't mean that our retail sector is in dire straits. In fact, there are several indicators that show we have a strong retail economy starting with our numerous non-chain retail stores. Look around the Alexandria area and you can see that these niche stores continue to be a vital and active part of the community that bring consumers and other retailers to the area.
Another factor is our strong retail pull. The pull factor was developed by Dr. Ken Stone, an economist from Iowa State University Extension Service, to provide a precise measure of sales activity in a locality. It is derived by dividing the per capita current dollar sales of a city (or county) by the per capita sales for the state. For example, if a city's per capita sales are $20,000 per year and the state per capita sales are $10,000 per year, the pull factor is 2.0 ($20,000 divided by $10,000). The interpretation is that the city is selling to 200 percent of the city population.
A pull factor index higher than 1.0 usually indicates that businesses are "pulling" customers from outside their community. Alexandria has the third highest pull factor in the state at 3.04. Alexandria continues to be one of the strongest retail centers in Minnesota outside of the Twin Cities metro area. On individual business categories, Alexandria ranks in the top 3 in any category for similar sized cities, with all the tracked retail and service category sales exceeding the expectations of a regional trade center.
While we have had changes in our retail sector, recent closures here point to a retail adjustment, rather than an economic red flag for our area. Many of the stores that have closed were a result of the chains strategically closing many of their stores after waning sales nationwide. This doesn't mean all physical stores are going away, or that retail is dying, but it does represent a massive shift in the retail industry as we know it.
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Nicole Fernholz is the director of the Alexandria Area Economic Development Commission. In the Know is a rotating column written by community leaders from the Douglas County area.