J.C. Penney was the Walmart of its day, disrupting local merchants by offering lower prices through national purchasing power. Now, a similar business model threatens Penney’s stores in small-town markets. Is it really a surprise that Sam Walton got his start at the company founded by James Cash Penney?
Place-based retailing has taken a beating nationwide the past couple of years. We feel it in Western Illinois.
Macomb, our county seat, has lost J.C. Penney at the end of July and K-Mart (Sears) at the end of 2016.
Retail market dynamics have been stormy for decades. Many household names dropped out over the years. Others are now foundering. In the case of Sears/K-Mart, I have read the word “hemorrhaging” to describe that mess.
In Macomb, Penney’s and K-Mart closed partly because of local conditions, including our region’s ongoing economic malaise and local and regional competition, especially with Walmart. The two-year Illinois state budget deadlock brought job losses at Western Illinois University and other state agencies. Meanwhile, the university’s enrollment has been declining for years. The city is struggling to keep its population above 20,000.
For Penney’s, this year’s 138 store closings nationwide, according to Business Insider, accounted for 14 percent of its stores, but only 5 percent of its sales. In short, these stores didn’t meet revenue expectations.
Macomb was just one smaller city to lose its store. In Illinois, closings included Canton, Effingham, Peru, and Sterling. In Iowa, stores closed in Decorah, Fort Dodge, Oskaloosa, and Ottumwa, all small cities anchoring rural areas. The closings struck at the heart of what was once Penney’s core small-town business.
The emergence of national chain stores around 1900 was significant in building a national economy that linked urban and rural places. Chain stores were part of economic nation building, the transition from more localized and regionalized economies to a more unified national mass-consumption retail economy.
James Cash Penney, Penney’s founder, was true to his middle name, with a firm grasp on chain retailing. He started as a store clerk and a few years later bought out his partners’ stores. By 1917, Penney’s had 175 stores in 22 states. By 1928, the chain had 1,000 stores, most of them located on Main Streets in small towns. The company continued to grow.
In the 1960s, Penney’s focused more on suburban stores and malls. The company has had its ups and downs since the global economy began radical changes in the 1970s. The company has continued to adapt.
During its rise, Penney’s reshaped the American small town shopping scene, replacing existing local merchants with a company that could use its buying power to offer good-quality merchandise to middle- and working-class customers with a low markup. If all of this sounds familiar, it should. History repeated itself. Sam Walton spent some of his early years working for Penney’s and then went on to establish Walmart, which again reshaped smalltown shopping patterns after its founding in 1962.
The loss of Penney’s and K-Mart is significant for Macomb and McDonough County as a manifestation of deeper economic problems here and across the nation. We have seen a bite taken out of our area’s wages and tax revenues. Local retail competition has become much narrower all of the sudden. Walmart is now the biggest dog in town by far. The closings further eroded an economy weakened by longer-term instability at the university. We have some fairly large empty stores on the edge of town that might not be filled easily. That’s unsightly, the sign of a struggling city that also seeks to maintain and enhance its charming downtown.
But there is little sentimentality for the corporate person that is J.C. Penney. This is business, and locals had no input into the decision. It does hurt to see people losing their jobs, especially in an area where opportunities are limited. Shoppers may face inconveniences, but they will find other places to shop, online, at Walmart, or in another town.
The closings are important signs of rapidly changing urban-rural relations specifically and national and global relationships generally.
The problems? Online competition, typically cited as leading to the demise of place-based stores, does play a part, according to statistics that have tracked the rapid rise of online retailing. This is an immediate factor, and it is real.
But if you get up on the web and read some of Penney’s history since the early 1970s, you will see a firm that has constantly adapted to turbulent changes in the global and national economies that resulted from the energy crisis, farm crisis, and other financial horrors, including the world financial debacle after 2007. Seemingly endless permutations in the retail sector and financial and capital markets and management strategies add to the instability,
The larger waves of change have been manifested by shifting regional demographics, a sinking middle class in rural and urban areas, generally stagnant worker income, and a host of other highly worrisome economic trends. Declining local and regional markets, especially in smaller towns, has led to the loss of the old-line chain retailers.
The larger changes are out of direct control of places. Local adjustments are hard and take time.
In these times, you can hope it will turn out all right and work for a better future. That’s all part of the struggle and journey of a contemporary community.
The sun continues to rise, and, from what I am hearing, people around here continue to look for other opportunities.
They keep trying, and that’s for the good.
Timothy Collins is an independent writer, editor, and consultant and proprietor of Then and Now Media. From 2005 to 2016, he was assistant director for research, policy, outreach, and sustainability at the Illinois Institute for Rural Affairs at Western Illinois University in Macomb. He is the author of a recently released fantasy book, Memories of Santa Claus, as well as Selling the State: Economic Development Policy in Kentucky.