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Study examines Minnesota’s changing retail economy

1 in 10 Minnesota retail dollars (in taxable sales) is now spent outside the state. “That’s a conservative estimate. And that percentage is only going to grow.”

— Bruce Schwartau

The Great Recession hit retail stores hard, with the industry shedding 7 percent of its workforce in Minnesota (Minnesota Economic Trends, 2018). But in 2015, Minnesota's consumers were spending again. That is good news for Main Street and Minnesota’s economy.

Still, even casual observers can see that change is happening in the retail sector. “There are some apocalyptic headlines out there about retail,” says Bruce Schwartau, an Extension program leader who studies Minnesota's retail industry. “Stores some of us have known since childhood are in those headlines. Change is happening fast."

That's why Schwartau paired up with Will Craig of the Center for Urban and Regional Affairs to take an in-depth look at how change is affecting Minnesota's retail landscape. Using 2015 data, they set out to see how Minnesota’s retail sector was doing six years after the Great Recession, and how current trends are affecting Minnesota’s retail landscape. (Read the report.)

More clicks. Fewer stores. More revenue.

There is some good news. Retail businesses that survived the recession were prospering in 2015 with, the report says, “taxable sales per business up 25 percent since 2009, after adjusting for inflation.”

Some stores, however, did not survive, and that’s left some empty storefronts. In fact, Minnesota lost 5,270 retail stores from 2009 to 2015. That’s 12 percent of the state’s total.* “Stores closed because people weren’t buying during the recession,” says Schwartau. “And some owners hit retirement age during that same time. The recession made it tough to find buyers for those businesses.”

The trend of fewer stores creating more total sales was seen in every part of the state — among both more and less successful retail centers. The top tier retail city of Rochester decreased its number of stores by 11 percent from 2009 to 2015, but grew sales by 16 percent. And the town ranked lowest among the 47 towns studied — Eveleth — lost 39 percent of its stores while growing sales by 27 percent.

Schwartau and Craig’s study examined several other factors changing the retail sector. Perhaps the biggest force working against Main Street retailers is online shopping. According to the report, sales by non-Minnesota retailers grew 63 percent since 2009 and now amount to nearly $3 billion. That means that 1 in 10 Minnesota retail dollars (in taxable sales) is now spent outside the state. “That’s a conservative estimate,” notes Schwartau. “And that percentage is only going to grow.”

(*Note:  According to 2017 data that recently became available, Minnesota lost 5,680 retail stores from 2009-2017 — nearly 13 percent of the state's total.)

A look at 47 trade centers

Schwartau and Craig examined 47 trade centers in Minnesota. Of these, they found that 70 percent were growing and even thriving. But 14 (30 percent) experienced no growth or decline.

How can retail economies adapt?

Extension emphasizes the need to adapt to change. “That’s why we work so hard to help communities understand the economic climate they are in,” says Schwartau, who also leads community economics programming at Extension. “Knowing the situation is a small part of the battle. Towns and businesses need to innovate in order to compete.”

Businesses and communities are making adaptations, finding ways to succeed in this new retail climate. Research and practice point to a few ideas to consider as they move forward.

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Author(s)

Joyce Hoelting

Reviewed in 2019

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