Tri-Cities and NE Tenn. sales tax collections scored an up month in February despite a flurry of news reports signaling gathering storm clouds.
MTSU’s monthly report on seasonally adjusted collections showed Morristown led the region in year-over-year gains by a full point followed by Kingsport-Bristol.
Here’s how February looked compared to last year followed by the change from January:
- Morristown MSA, up 7.9%, up 1.1%.
- Kingsport-Bristol, up 6.9%, no change from Jan.
- Knoxville, up 6.2%, up 1.9%.
- Johnson City MSA, up 5.9%, up 0.6%.
So where are the gathering storm clouds?
On the micro level, February’s MSTU collections report came on the heels of an ETSU Q4 report that said the impressive retail growth in Bristol linked to new outlets at the Pinnacle may be over for the present. At the same time, Economist Steb Hipple affirmed that there has been a shift in the retail market share away from Kingsport merchants to Bristol’s new shopping centers.
A drill-down on Hipple’s numbers to illustrate the market share from the region shows the Johnson City metro area dominated the regional market with a 31.3% share. It was also the first time Johnson City’s market share was higher than the areas outside the three metro areas. Those other areas had a 29.4% market share in Q4, down from 36.8% in Q3. Kingsport had a 22.2% share, up from 19.5% and Bristol had the lowest share in the region – despite its impressive year-over-year growth in the metro area.
The gathering storm clouds come from other reports that look at the market from slightly different perspectives and more current data.
Census data show retail sales had their worst two-month stretch in more than two years in February and March. March’s 0.2% decline was driven by lower fuel prices and auto profits and the delayed delivery of tax refunds.
Beyond that, the storm cloud forecast shifts its focus on some trends.
- Depending on who you listen to retail is going through an apocalypse led by bankruptcies and store closures or a natural evolution of the industry, which also has some apocalyptic characteristics. Currently, a little more than 3,500 stores across the nation are on the threshold of closing in the coming months. The industry, which is the fourth largest jobs sector here in the Tri-Cities, is also beginning to shed jobs as merchants adapt to closures and tighten their belts to compensate for the bit e-commerce is taking. About 60,000 retail jobs have been lost in the last few month alone, according to a recent Money Marketplace broadcast.
- Retail experts expect more brick-and-mortar stores will call it quits not because of the e-commerce competition but because of the industry’s shifts to compensate from the overbuilding of retail space. That’s a growing concern among some market watchers here in the Tri-Cities where the retail space expansion continues. According to a recent Business Insider story, “the U.S. has the world’s largest ratio of retail space per capita – 23.5 sq. feet per person. Canada ranks second behind the U.S. with 16.4 sq. ft. per person and Australia is third with 11.1 sq. ft. per person.
- Although the National Retail Federation expects retail sales to increase by 3.7% this year the market share is shifting with e-commerce taking a bigger bite. So, while retailers are hurting because of the buying trend and a problem with many brick-and-mortar outlets consumers are seeing their access and buying power increase.
- The next trend taking a bite out of retail is the hollowing out of the middle-class caused by the replacement of well-paying jobs with lower-paying jobs during the restructuring from the Great Recession. That’s one driver behind the woes at Macy’s, Sears and J.C. Penney’s . That effect also mirrors the disparity we see in the economy. While the mainstay stores of the middle-class are hurting luxury outlets and the dollar stores are thriving.