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Minnesota retail closures have ramped up in recent years. That hits particularly hard in Greater Minnesota

In small Minnesota towns, tax bases are smaller and shoppers have fewer options.

Willmar Herberger's
Willmar community leaders are hoping that with Herberger’s closed, the customers who come to Willmar to buy clothes and home goods don’t start to go elsewhere to shop.
West Central Tribune/Carolyn Lange

The Herberger’s department store in Willmar, Minnesota closed last August after four months of liquidation sales: Clearance. Store fixtures for sale. Everything must go.

All the remaining Herberger’s and Younkers department stores across Minnesota closed last year as a result of their parent company, Bon-Ton Stores, filing for bankruptcy.

In places like Roseville, Bloomington, Edina and Stillwater, where the company had stores, customers have lots of other shopping options nearby. But in Willmar, the county seat of Central Minnesota’s Kandiyohi County with a population of about 20,000, there aren’t a huge number of other stores. Willmar provides medical services, entertainment and shopping to surrounding smaller towns like Olivia, Granite Falls, Benson and Montevideo.

“We are a regional center, so a lot of people travel to Willmar for shopping, and they’re maybe coming here for their health care needs and getting groceries, and they like to stop at a local store,” said Willmar Mayor Marv Calvin.

Community leaders are hoping that with Herberger’s closed, the customers who come to Willmar to buy clothes and home goods don’t start to go elsewhere to shop.

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Retail closures

Brick and mortar retailers like Herberger’s have had a tough go of it in the last decade. Tighter family budgets during the Great Recession meant people had less money to spend on clothes, shoes, electronics and other goods.

Now, wages are rising, unemployment is low, and people are buying stuff again. But they’re making a lot of purchases from online retailers like Amazon that keep prices so low it’s hard for competitors to keep up. Faster shipping has eliminated long wait times, even for people who live far from big cities and big box stores.

Lots of retailers have caved to built-up pressure in recent years. In 2017, the Limited and Gander Mountain and Toys R Us filed for bankruptcy. In 2018, Herberger’s owner Bon-Ton followed filed for bankruptcy.  Just a quarter into 2019, there have been closures of Shopko, Payless Shoesource and Sears due to bankruptcy, among other store closures.

Between 2017 and 2018, retail jumped from an estimated 14 percent of workers in layoffs reported to the Minnesota Department of Employment and Economic Development’s dislocated worker program to 37 percent (companies with 50 or more employees in Minnesota are required to report large layoffs to the dislocated worker program).

Just a quarter into 2019, there have been closures of Shopko, Payless Shoesource, Sears, American Girl and Charlotte Russe stores.
REUTERS/Mike Segar
Just a quarter into 2019, there have been closures of Shopko, Payless Shoesource and Sears due to bankruptcy, among other store closures..
Overall, retail isn’t faring as poorly as it did during the Great Recession, but it does seem to be facing some new pressures, said Ron Wirtz, a regional outreach director at the Federal Reserve Bank of Minneapolis.

“There’s a lot of online sales going on, so there’s fewer sales going on proportionately in brick and mortar stores,” said Ron Wirtz, regional outreach director at the Federal Reserve Bank of Minneapolis. “Sporting goods and books and things of that nature have seen a little bit more pressure because of the Amazon model. It’s not that we’re not buying lots of things, it’s that we’re buying them in a different way.”

While this sort of change is newer in retail, the industry has always been in transition, Wirtz said: think about the Montgomery Ward catalogs, which revolutionized the industry by allowing people in far-flung places to order all the modern conveniences.

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Now, the internet is shaping retail in different ways: While Amazon and other e-commerce giants are eliminating some jobs in brick-and-mortar retail, they’re creating them in industrial construction as they build warehouses, and in logistics, which are more centralized.

An economic engine

The closure of a few brick and mortar stores aren’t such a huge deal to the economic ecosystem of the Twin Cities and their suburbs, where unemployment is very low, consumers have lots of options and local governments have strong tax bases. But they can affect smaller communities quite a bit.

Amazon
REUTERS/Neil Hall
While Amazon and other e-commerce giants are eliminating some jobs in brick-and-mortar retail, they’re creating them in industrial construction as they build warehouses, and in logistics, which are more centralized.
The fear for many Minnesota communities like Willmar is more about losing something that attracts people to town — and a source of tax revenue — when a store closes.

“On the negative side for us is (the) people who may have, in the past, been driving to Willmar to go shopping, now they may drive to St. Cloud,” Calvin, Willmar’s mayor, said.

Herberger’s, which along with Younkers stores employed an estimated 1,900 in Minnesota, isn’t the only big retail chain closing stores in Minnesota regional centers.

Shopko, a big box store more akin to Target and Walmart, but smaller, recently closed 35 stores in Minnesota after filing for bankruptcy, a move that affected an estimated 1,140 jobs — or an average of 32 per store, according to DEED data.

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Filling a hole

In addition to concerns about losing sales tax revenue to other towns, in towns like Windom, Cokato, Glencoe, Warroad, Kasson, Luverne, Pipestone and Ely, the closure of a Shopko — stores which typically employ between 15 and 55 people — can force unemployment up as all of a store’s workers lose their job at once, said Cameron Fanfulik, the executive director of the Northwest Regional Development Commission.

“Luckily the communities that have these Shopkos do have significant other economic sectors where they could maybe blend into,” Fanfulik said. “Still … you end up having to go through the process of finding another job and making sure your daycare needs are met and all of that other stuff in order to take those jobs.”

With unemployment as low as it is — 3.2 percent statewide in March — these closures generally aren’t as big a deal for workers as they might have been during the recession, when unemployment was nearly three times as high. Retail workers, especially low-income workers, tend to want to go right back to work and find a job quickly, said Lensa Idossa, the supervisor of DEED’s dislocated worker program.

But there are other challenges that come with the closure of a bigger retailer for smaller cities. Namely, finding a tenant for a building with thousands of square feet in space. Unless another big retailer comes to town, it could take two or three smaller businesses to fill some of these stores’ spots.

“It isn’t the easiest building to re-fill for some of the smaller towns that are going to be going through this process,” Fanfulik said.

In Willmar, the owner of the Kandi Mall recently proposed moving city government services into the 50,000 square foot former Herberger’s space in the mall, putting in a community center and turning some of the parking spots into green space, per the West Central Tribune.

Willmar still has a J.C. Penney, Calvin said. That retailer has seen its own struggles, closing stores as sales fall.

Kohl’s has said it’s coming back to town, Calvin said, which would give residents another place to shop locally.

“People need to remember to shop local first, and if you can’t find it local, then go to your Amazons and all those,” he said. “But you should always shop local first, because that’s where the dollars are invested (in the community).”

A matter of identity

Just off Interstate 94, Fergus Falls, the county seat of Otter Tail County that’s home to about 14,000 people, has seen a a string of retail closures in the last several years.

In 2014, it was KMart. In 2017, Target closed, prompting the mayor to ask company headquarters to reconsider, to no avail. Last year, Sun Mart, a local grocer, and Herberger’s. This year, Shopko.

At current unemployment levels, cities aren’t necessarily trying to attract new businesses right now so much as they’re trying to attract people to work the jobs they already have, said Ryan Pesch, who works in community economic development at the University of Minnesota Extension. It doesn’t help to have a bunch of empty stores.

“Do I want to live in a community that’s one sad grocery store and that’s it? The vitality of a main street or retail district, it does have an impact on the quality of life of people who live there,” Pesch said.

There’s an economic impact to all of this, of course, Pesch said. But the emptying out of big box stores also has an effect on community psychology.

“Everyone in town’s like we’re a bunch of fricking failures. Our town’s failing,” Pesch said. “I try to tell these guys, it’s not you. It’s not something you should take personally because it’s completely driven by the national marketplace.”

Correction: This article has been updated to accurately reflect the stores that closed in Fergus Falls.