“Well, I guess that’s the way it goes… one out and one in.” Rick – Casablanca (1942)
Reading of the closure of The Bay in Moncton yesterday I was reminded by how much churn there is in any local economy. In 2010, Maple Leaf Foods announced it would close in Moncton laying off over 400 staff. ACOA announced a reduction of staff and another one is supposedly coming. The feds reduced employment in Shediac and DFO is on the chopping block. The Bay is a fairly big employer but conventional economic theory says that retail sales activity will be absorbed elsewhere – leaving not much of a net loss.
The big closures are visible but the reality is that businesses are opening and closing on a weekly basis in a place the size of Moncton.
For people like me that think a lot about economic development it is clear that government policy should not be tuned to try and keep companies afloat that do not have good business models. I realize in smaller communities this becomes even more difficult but there are too many examples of failure that was propped up by government only to eventually fail anyway.
The Bay, which had excellent men’s shoes, was always empty. Even during the Christmas season it seemed sparsely populated. The business model for that firm is clearly not in small urban centres.
P.S. I probably shouldn’t have used government facilities in the same breath as Maple Leaf Foods or The Bay. The ‘business model’ approach doesn’t work well when thinking about government facilities. The Public Service Pension Centre in Shediac (the one that lost 150 jobs in June of 2011) was put there as a legacy for a strong federal Minister from the riding. Local stakeholders need to lobby to try and keep those types of facilities in their communities because locational decisions are primarily political in nature.
Regarding the Bay in small urban centers…
Prince George, BC, is smaller than Moncton – about 80,000 people or so. There, however, The Bay was always quite busy – it was known in town as where you shopped for quality goods.
Clearly, there are more factors in play (as I’m sure there always are), although I couldn’t say with any degree of certainty what exactly what those factors are.
You could probably make an argument that as Highfield Square closed around it, The Bay became a throwback to the 1960s and 1970s, with large department stores along Main Street. If you look at the photos on Vintage Moncton, you see Reitman’s, Woolworths, and The Met lining the road. All these types of businesses left for malls. I grew up in Moncton in the 80s, and I barely remember these big stores downtown.
Highfield Square survived as a mall for a while, but as it closed down, The Bay became stranded. There was no reason to go to that mall unless you wanted to visit one of the saddest food courts in New Brunswick.
The last time I was in Mic Mac Mall in Dartmouth, The Bay was packed. I’m guessing that if you could magically transport that store from Highfield to Champlain Place, it might have a few more years left in it. Department stores can do well in small urban centres, but they need a decent location to have any shot at all.
I agree with your assessment of the closure of retail stores like the Bay. I’ve always had some antipathy toward national retailers because of their tendency to suck money out of the local economy without putting much back. So I’ll shed no tears for this one.
Too bad that consumers, in their rush to save a few bucks, have forgotten that we could always rely on local, family owned businesses to belly up when the community needed something. But of course, those times are long gone.
I think we need to differentiate, though, between the churn in retail from the enterprises that create incremental value. We should be really concerned about loosing jobs that bring new wealth into the local economy especially through export sales. As you know, the loss of a manufacturing job will have greater impact than the churn from restaurants becoming record stores.
As for governments keeping firms afloat, and ideology aside, the important question to ask is, are the benefits of keeping it afloat greater than the costs of seeing it fail? The answer won’t always be no.
The business model of Detroit didn’t look all that viable in 2008. Gov’t realized that ther would be catastrophic losses within the wider economy if these companies went under. Intervention saved a lot of jobs and the industry is healthier now than then (‘though I’m not sure about Wall St.). In New Brunswick we should ask the same question of industries looking for subsidies… The analysis should go beyond the business model of the company and consider the broader impacts on the economy, now and over time.
David, always enjoy your point of view!