Dr. Mike Walden
North Carolina Cooperative Extension
I moved to North Carolina in 1978. One of the first purchases I made in my new state was a desk. To me, having a desk to use for writing and preparing lectures was more important than having a bed. I slept on the floor of my apartment for a year!
I bought that desk from the old Hudson-Belk department store in downtown Raleigh. I still have it; in fact, it’s one of my most prized possessions. It has a unique curved style which visitors to my home always admire.
The downtown Raleigh Hudson-Belk store no longer exists. It closed in 1995, and the building has been converted to condos and offices. Few newcomers to Raleigh are aware of the history the structure has carried.
And now, it may not be too long before the Belk name is gone from retailing. In August it was announced that Belk was being sold to a New York investment group. Although the new owners immediately said nothing will change, I fear that Belk’s will ultimately disappear like other family run department stores, such as Gimbel’s in New York, Shillito’s in Cincinnati (where my childhood clothes were bought) and Thalhimer’s in the South.
Belk has a long history in North Carolina. Begun by two brothers in Charlotte over a century ago, Belk was an innovator of the department store model. After some lean times during the Great Depression of the 1930s, it rapidly grew to more than 400 stores all across the South. A unique part of the Belk operation was the involvement of a local partner in its expansion to a new territory. Thus, it was Hudson-Belk in Raleigh, Belk-Tyler in Greenville, Belk-Leggett in Roanoke Rapids and Parks-Belk in Concord.
So what went wrong? There are many factors. One is the relatively slow economic recovery. The recent recession (2007-2009) 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 and cautious spending, and tighter borrowing standards. Most retailers have likely trimmed their long-run growth prospect, thus making any existing company less profitable and possibly open to a buy-out.
Another obvious challenge for any “bricks and mortar” store like Belk has been the movement to online buying. Cyber buying now accounts for 7 percent of all consumer purchases, double the share a decade ago. 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 permanent stores at fixed locations.
The homogenization and nationalization of the economy has also hurt regional companies such as Belk. When it was more difficult and costly to communicate and travel the country, regional companies with attention to local styles and customs could thrive. Now, with some exceptions, people have very similar preferences and buying habits everywhere in the country. 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 a reference to the millennial generation, born between 1980 and 2000. Now the largest in numbers and rapidly taking over the workforce, the millennials have been displaying some buying habits that are working against large department stores.
First, the millennials are staying in school longer and delaying marriage and having children. Spending from married families with children was traditionally the mainstay of sales at department stores like Belk.
Second, the 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. This has been observed in everything from clothes buying to restaurant eating to entertainment. Once more, this preference has not been good for companies such as Belk.
Last is an issue specific to family owned and operated stores. The issue is the matter of succession – transferring control from one generation to the next. Research shows less than one-third of family owned businesses successfully turn over control from the first generation to the second generation, and another 50 percent don’t accomplish the in-family transfer from the second generation to the third generation. This means that in less than 20 percent of the cases the third generation is still running the company.
The third generation of the Belk family is currently at the head of the company, but there is no obvious fourth generation successor.
Having worked in a family owned furniture store for several years, I’ll always have a soft spot in my heart for firms with a long tradition of family ownership. But, as is often said, times change. To an economist, change is the norm, not the status-quo. While my head understands this, my heart sometimes doesn’t. Do you feel the same? You decide!
Dr. Mike Walden is a William Neal Reynolds Distinguished Professor and North Carolina Cooperative Extension economist in the Department of Agricultural and Resource Economics of North Carolina State University’s College of Agriculture and Life Sciences. He teaches and writes on personal finance, economic outlook and public policy. The College of Agriculture and Life Sciences communications unit provides his You Decide column every two weeks.
Previous columns are available at http://www.cals.ncsu.edu/agcomm/news-center/tag/you-decide
Related audio files are at http://www.cals.ncsu.edu/agcomm/news-center/category/economic-perspective