Suburban Small Businesses Fear The Minimum Wage Hike

By: Jade R. Gardener

All Emily Siegel has left to remember the Larchmont of her childhood are memories and photos. Today remnants of stores such as Toy and Sports, Wendy Gee’s and almost a dozen more community staples are now ghosts. Since the financial crisis the number of small businesses in Larchmont, NY has decreased drastically. Very few new businesses have taken their place, leaving many empty storefronts.  “Stores that we would go to for most our lives are just gone. Every time a business closes it steals the spirit of the town,” said Siegel.

The town of Larchmont, once celebrated as the 11th best place to live in the country heavily because of its plethora of small businesses, is town is now struggling to keep these small businesses alive. Since 2009, Larchmont has seen a 40% decline in small businesses.

The death of Larchmont’s small businesses is due to a number of factors and the impending minimum wage increase is anticipated to lead to the increased decline of businesses on the already edge of collapse. The loss of small businesses is not just a worry for Larchmont but all small businesses in the suburbs of New York City.

The population of the suburbs that surround the New York City is roughly 1.5 million residents. Each town is dealing with the impending increase in different ways. For many retailers, the rising minimum wage is an added burden to their already overflowing list of economic strains. Over the next six years, minimum wage workers in New York state prepare to see an increase in their income. For the lowest waged workers, this is a victory. For small business owners especially in the suburbs on the outskirts of New York state, it is a loss.

“In these small towns, we are fighting a number of issues. There are exorbitant rents for small businesses and the internet is making the need for a retail store unnecessary,” said Bob Marrone member of the Larchmont Chamber of Commerce.

In most recent times Larchmont has seen the closing or retailer Wendy Gees after 24 years in business. This loss has many patrons of the store worried about what is next. Siegel worries what the increase will do to other businesses, “I see large and small retailers struggling. Many of them are closing earlier and there is less staff. If they all have to pay more for minimum wage employees, I am afraid to see what town looks like by 2021.”

Although the suburbs played no part in the Governor’s approval of the minimum wage they have to carry it out.  As seen in chart New York City Minimum Wage  Suburbs vs. The City, the city and the suburbs will both get to the minimum wage of $15 an hour by 2021, but the suburbs will move at a slower and less gradual pace.

NYC vs. NY Suburbs Minimum Wage
NYC vs. NY Suburbs
Minimum Wage


While the city minimum wage will increase by two dollars every year until reaching fifteen in 2018 the suburbs have decided on a more steady one-dollar a year increase. The issue here is while those in the boroughs will start making fifteen dollars by 2018 those in the towns and villages on the outskirts of the city must wait until 2021.  Residents such as Siegel hope that the slower increase allows small businesses to get their footing and map how to afford the increase.

Workers in the suburbs say they need the increases terribly.  As many complain minimum wage workers in the city are not subject to the expenses required for working in the suburbs. Small businesses such as the Cherry Tree Frozen Yogurt shop in Mamaroneck, NY already pay some of their employees above the present minimum wage.

Jessica Mendoza who started Cherry Tree Frozen Yogurt  three years ago start making about $8.75 and hour and now makes already makes $12 (although the increase to $12 for suburbians will be in 2019). Mendoza sees the higher present wage as a positive,  “You have to drive everywhere here so living here is more expensive. Now that I am making more I have more for books and to save.”

Some workers, however, hope that the increase actually leads to increased wages for those making above the minimum wage. Some workers, however, believe that the increase in the minimum wage will lead to a boost for those already making more than minimum wage.

“If those making minimum wage get an increase then that means if you are making more than the minimum wage already you should see an increase too,” said Elena Espinal of the Fair Deal Cafe in Yonkers, NY.

Even though the minimum wage seems promising to workers it is a potential nightmare for business owners, who are dreading the increase in their costs.

In Mount Vernon, NY small businesses owners are dreading the increase as well. “I try to keep my prices low for the consumer. If I have to pay my workers more, I can’t give raises and will cut hours. The reality is I will also have to increase prices by at least 25%,” said Meisha Jones owner of Cupcake Cutie Boutique.


Some owners like Shaheer Brewster of Apricots and Honey are reluctant to hire. “I just opened. I am $600,000 in debt already. I am just trying to pay my bills now. I don’t even expect to pay myself for two years, there is no way with that high of a minimum wage that I can hire someone now.”

Although workers are optimistic the truth is owners are faced with a dilemma, pay wages or close. “ I have talked to some small business owners that are weighing their options. Some will raise costs. Others will fire workers or cut hours, some will pay off the books and other will close,” said Jones.


Politicians, on the other hand, say the increase in wages will help small shops by increasing spending. Officials, however, hope that the increases in wages will lead to an increase in spending from consumers.

The increase is a positive one says, Mount Vernon city council president, Marcus Griffith.

“We want to see more small businesses growing in the community and if people make more, the hope is that they will spend more too, thus allowing businesses to cover the increase”, said Griffith.

The problem, however, will occur if a business can not cover the increase. Small businesses are risky and time-consuming. The budgets and salaries are directly dependent on consumer spending. With consumer spending still not back to their pre-recession levels the increased the minimum wage is an added strain that threatens the success small businesses throughout the suburbs of New York.

The Economic Fallout of Sports Authority

Sports Authority_1

American retail is in the midst of a paradigm shift. Amid a retail climate that is increasingly dominated by online sales, brick and mortar chains are being forced out of arenas that they once dominated.

Ten years ago, Sports Authority, which operates 466 stores across the United States, was the nation’s largest sporting goods retailer. Yesterday, it announced it would close all of its stores. Aérospostale, a casual clothing and accessories brand, Scoop, a high-end boutique chain, and Quicksilver, a surfwear retailer have each recently filed for bankruptcy and face similar fates.

The demise of bricks and mortar retailing could spell trouble for many, including the thousands of workers Sports Authority currently employs who now face uncertain futures. Many of the 29-year-old company’s 15,001 employees are expected to hit the jobs market. The timing is inopportune.

A sales associate at Sports Authority’s Denver location, who didn’t feel comfortable giving her name, said she has already begun looking for another job. “I am really willing to do pretty much whatever,” she said. Word is the location will be closing sometime in June. “I honestly don’t know what I’ll do,” she said.

Sports Authority is one of the latest national retailers to fall prey to mega “e-tailers” such as Amazon, that increasingly draw consumers, lured by convenience and endless selection across myriad categories, off the streets and onto the screen.


A search for “Wilson tennis racquet” yields almost 2,000 results. 

In 1999, e-commerce accounted for just 0.6 percent of all retail sales. Last year, it made up 7.5 percent of total retail sales, according to seasonally adjusted economic data from the Federal Reserve. April’s retail sales report, released last Friday, showed remarkable gains in online sales – they jumped 2.1 percent.

Some soon to be former Sports Authority employees will find work with its competitors – Modell’s, Dick’s, Cabela’s, Bass Pro Shops – or at other retailers, but some will have to pivot toward other industries. “Obviously not all of them are going to be able to find jobs in retail,” said Thomas Simons, an economist at Jefferies. “They are going to need to find new skills.” Simons noted that many retail workers are younger, and can more easily be retrained to find different types of jobs than older workers.

Domisah Purnell, a cashier for Sports Authority in Brooklyn, doesn’t know when the store will close, or what she’ll do next. “I am starting to look for other things. I will most likely look to work as a cashier because I have the most experience in that.” She has no work experience outside of the retail industry, but is confident she’ll be able to find another similar job.

Salespeople at other bankrupt national retailers including Aéropostale, are too unsure of what they’ll do next. Jeffrey, who for privacy purposes declined to give his last name, expects that within six weeks he’ll be out of a job at the casual apparel company’s Times Square location. “I’ll either file for unemployment because I’ll be laid off or I’ll see if my stepdad can get me a job at Sheraton Hotels, where he works. But that’s a back up plan. If I don’t find anything else, I’ll just go there,” he said.

Although today’s jobs market is relatively strong, the retail industry shed jobs last month, and will likely to continue contracting. By the end of 2016, retail layoffs are expected to be at their highest level since 2010.

Dollar stores are thriving – Dollar General plans to open about 2,000 new stores by 2017, to operate more than 14,000 total stores. But dollar stores are unlikely to offer wages that are above or even match wages at Sports Authority. Despite gradual wage growth – overall wages rose 0.3 percent in April – more job seekers and fewer job openings in the retail arena will put downward pressure on wages, Brown said.

“A lot of these chains are closing right now, and the bad news is that you are probably an under skilled worker, and that’s why you’re working in retail. You’re going to have a hard time finding another opportunity in retail,” said Garrick Brown, Vice President of Retail Research at Cushman & Wakefield.

There’s a potential silver lining, though. Some retail workers might be able transition into office work, for which they could earn more than in retail. “If you get into more professional services the wages are higher and benefits are better.”

The prospects for the real estate occupied by liquidating or downsizing retailers is also uncertain. Sports Authority’s 466 stores range in size from 8,000 to 80,000 square feet, and could eventually be developed into other property types. If the trend away from big-box retail continues, their leasing agents will have trouble finding new tenants.2016-05-26 16.36.37 HDR

“I think rents will probably drop and I think some very large retailer properties are going to need to be repurposed at some point over the years. I think there are going to fewer and fewer of those properties that will make economic sense to run at that size,” said Jefferies economist Thomas Simons.

Sports Authority’s competitors could take over existing stores, and enter new geographic markets. Some spaces could be transferred to grocers, which often occupy spaces that are between 30,000 and 40,000 square feet. “A fair number of retailers are this size box,” said retail expert Joseph Feldman.

Feldman said that the brick and mortar retail model should be adjusted, but that it won’t ever be slaughtered by e-commerce. “If you live in a place like Columbus, Ohio and everyone on the block wants something delivered at a different time, it’s very expensive. I understand why it’s attractive to the consumer, but the consumer is going to pay for that ultimately. There’s a reason why for three millennia there have been markets and bazaars that people go to and buy stuff.”

“Chances are they’ll be filled with something,” Larry Perkins, CEO of SierraConstellation Partners, an advisor to middle market companies in transition, said of the vacancies. “But it may not be fast.”

Nick Rossollilo, president of Concinnity Financial, sees evidence of a longer-term trend in Sports Authority’s shuttering. “I think someone will move in on the Sports Authority assets in some of the locations but I do think some of them will close up and just stay vacant.”

“It’s probably a scary time to be an investor or owner of commercial real estate,” he said.

Can automation be the death knell for minimum wages and human jobs?

By Harini Chakrapani

bktouseBrent Kirkpatrick taking electronic food orders on the Amazon tablet at Creperie, Macdougal Street, Greenwich Village, New York City. Photo by Harini Chakrapani

Brent Kirkpatrick cheers New York’s decision to phase in a $15 minimum wage increase.

“I have been underpaid for majority of my restaurant life. It is fair to take into account what the cost of labor is,” said Brent, 45, who makes crepes at Creperie, a restaurant in Greenwich Village, New York.

But now, as a proponent of the minimum wage increase he is in awe of technology that made the delivery guy’s job redundant.

“The delivery guy was getting paid by the hour and would sit here without any deliveries. That’s six to nine hours without working, not worth it for the employers and employees,” said Brent.

Creperie availed the services of online food delivery providers Caviar. Caviar has its own delivery team and is connected to Creperie’s orders via a tablet application. When a customer places an order, Caviar picks up the order from Creperie and delivers directly to the customer for a flat fee.

“Technology is less likely to make the type of errors humans make while taking an order. Mobile/ tablet applications are an organized, efficient and accurate way of handling deliveries as opposed to a person answering the phone. The interface is better,” said Brent.

From small dessert joints such as Creperie to large chains such as Panera Bread, Chili’s and Applebee’s that have automated their food ordering and payment services with touchscreen tablets, technology is making in-roads into the restaurant industry. Now, worries are mounting that technology could take away human jobs.

The argument is simple enough: how can restaurant owners continue to enjoy their profits while meeting the increase in labor costs?

“The prices of products will go up. There will be more pressure on restaurants to limit employment,” said economist Harry Holzer, professor of public policy at Georgetown University.

According to Albany, New York based non-partisan think tank Empire Center the labor costs are high. In a study published in November, it concluded how the $15 an hour wage increase could threaten the economic well-being of 3.1 million workers by eliminating 432,500 jobs.

“One of the ironies here is that it is the big corporations like McDonald’s that will have the easiest time automating their services. People that will be hit the hardest with these wage increases will be the mom and pop restaurants that won’t have the capital to do it or the ability to do it on scale,” said Ken Girardin, policy analyst at the Empire center.

Two years ago, Chili’s embraced automation by allowing customers to order and pay their bills using using the 7-inch android tablets sitting atop their tables instead of paper menus.

Texas based startup Ziosk that developed the technology for Chili’s tablets had only wanted to solve a basic problem with restaurants while offering its product.

“On a Friday or Saturday night, restaurants can get very busy, even if they have a large number of staff, to serve all the customers. A lot of people want to pay and leave around the same time, and they just can’t,” said John Regal, chief strategy and product officer of Ziosk.

Ziosk’s tablets feature an in-built printer, a 22-hour long lasting battery, a camera and an interface with food pictures and games.

Its business model is attractive. It doesn’t bill restaurants for the cost of the tablets or installation. Instead, it charges a subscription fee for its service which includes games.

Ziosk has been successful, deploying about 65,000 tablets in more than 1,250 restaurants in all 50 states.

With food ordering and payment being automated, the threat to a server’s job seems real. But, John Regal insists Ziosk is only a server assistant, helping servers during peak times.

“When you order a burger there are a lot of questions to be answered: how do you want your burger cooked, do you want cheese on it, if you have any dietary restrictions. In these cases, a server can be faster than technology in trying to figure out the right order,” said John.

Companies like Domino’s and Panera Bread have expanded their scope with technology.

Panera Bread lets customers order food online from their office, car, work or home up to five days in advance and pick up at a scheduled time without waiting in line.

Domino’s Australia wants to replace delivery drivers with its four wheeled bots called the Domino’s Robotic Unit (DRU).

It doesn’t stop there. With every passing day, technology is getting smarter, expanding its electronic presence into areas that have been accessible only to humans.

Makr Shakr, an Italian based company co-founded by engineer Carlo Ratti, professor at the Massachusetts Institute of Technology introduced its robot bartenders in 2013.

Makr Shakr’s robot arms programmed to mix cocktails have caused quite a stir within the robotics community.

According to a spokesperson, the company today serves Royal Caribbean cruise ships and is set to promote a portable version of its bar system.

Others remained skeptical about how far robots could go in displacing human hands from the bar or kitchen.

“People can do jobs that are far more complex than a robot. Robots can be useful in doing some simple delivery tasks that can be automated. They can’t replace a person, but free up the time of a person so that they can do the more high value part of the job, which is face to face customer service,” said Andra Keay, Managing Director of Silicon Valley Robotics, a non profit San Francisco based industry group, that supports innovation and commercialization of robotics technology.

But according to economist Harry Holzer, who previously served as chief economist of the Department of Labor restaurants, in particular fast food chains seemed conducive to robotics automation.

“The easiest jobs to automate are the ones that involve very routine, repetitive, activities. Fast food is very routinized. There are only so many ways you can make a big mac—spread the sauce on the bun, cut up the lettuce and tomatoes,” explained Harry.

Whether or not robots become the cause for human unemployment remains to be seen. But for now, it seems clear that restaurants are in a rush to automate as a response to the increase in minimum wages.


Manufacturing Lost Millions of Jobs, But How Did It Get There?

By Kathryn Casteel

Developed countries all over the world have transitioned away from production and manufacturing for decades. The U.S. in particular shed over 5 million jobs in the manufacturing sector since the turn of the century as a result of various trade policies and advancement in technology.

The nostalgia of a once thriving industry haunts present day policy makers. Presidential candidates, both Democrat and Republican, have announced plans and promises to bring manufacturing jobs back to American soil.

Some economists and policy experts argue the investment in manufacturing isn’t worth the effort, while others praise it.

But what exactly contributed to the decline in the U.S. get here and what are the options going forward?

Click here to see the rest of the interactive timeline. 
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A diversified economy in Dallas keeps Texas going amid low oil prices

Unemployment in Dallas Houston 2008 - Present

The other side of the apartment complex was still being built when Helen Hill moved into her new studio apartment in Dallas. It was an easy choice for the 29-year-old Dallas-native to move back to her hometown after two years of living in China. “It’s a cool city and the quality of living is really good,” Hill said.

A decline in oil prices didn’t hurt oil-dependent Texas as one might expect. Houston has suffered job loss in the mining and logging sector since 2014 but Dallas, on the other hand, is thriving.

Continue reading A diversified economy in Dallas keeps Texas going amid low oil prices

Five Things to Watch on the U.S. International Trade Report

U.S. international trade had a disappointing first quarter. The gross domestic product grew slightly by 0.5 percent on an annualized pace, according to a report released last week by the Commerce Department. This is the slowest pace in the past two years. The U.S. economy is still suffering the effects of a strong dollar and a weak global economy, which makes American goods more expensive to the world at large. The U.S. International Trade report for March will likely reflect the nation’s modest growth. Here are five things to watch in tomorrow’s report released by the Department of Commerce.

  1. A decline in exports

Economists surveyed by Bloomberg predict a $41.3 billion trade deficit for the month of March, a narrowing of $5.8 billion. This is welcoming news since the gap widened to a six-month high of $47.1 billion in February.

Continue reading Five Things to Watch on the U.S. International Trade Report

Five Things to Watch for April’s Auto Sales Report

Kathryn Casteel

American auto manufacturers release their April sales numbers tomorrow morning. Industry analysts, such as and Kelley Blue Book, are expecting total vehicle sales for last month to hit around 1.52 million. Here are five things to watch as the reports are released.

  1. Will April’s numbers meet expectations?

Analysts predict that April’s seasonally adjusted annual rate for vehicles will hit around 17.5 million for the month, up from March’s rate of 16.4 million. The month of March wound up disappointing for analysts that expected a rate around the mid-17 million range. Economists say one month’s data doesn’t necessarily make a trend.

“We believe an early Easter holiday likely depressed vehicle sales in March, therefore they should bounce back in April,” said Ryan Sweet, senior economist at Moody’s analytics.

However, a second month of missed expectations could signal that auto sales are finally leveling out after record breaking numbers last year.

2. Is growth in truck and SUV sales slowing down?

Surges in SUV and truck sales were highlights for auto manufacturers for the past several months.

Low oil prices played a major factor in sales growth over 20 percent for compact SUVs and crossover vehicles in both February and March. Analysts predict April SUV and truck sales will be up 5 percent from last year, much lower than the past two months.

The national average price for gasoline has increased to around $2.14 per gallon. This number may be lower than during the recession period, but rising gas prices could make consumers a little more hesitant to purchase larger cars and trucks than they were a few months ago.

3. What is going on with America’s “Big Three” manufacturers?

Analysts forecast that General Motors will be down 2.3 percent in sales growth from last year, after reporting less than one percent growth the month before. Ford Motor Company and Fiat Chrysler expect to report sales growth around 5 percent. These manufacturers reported much stronger growth earlier this year.

However, foreign manufacturers, such as Nissan and Honda, are expecting another strong month in sales for April.

Jeremy Acevedo, industry analyst at says American manufacturers saw most of their growth in SUV and truck sales for the first part of the year.

“They’re not seeing the same amount of growth there,” said Acevedo.

Now that SUV and truck sales are starting to cool, so are overall sales for America’s biggest auto manufacturers.

4. What would a strong report mean about U.S. consumers?

A cut back in vehicle purchases made a significant impact in overall retail sales in March. The Commerce Department reported a 0.3 percent decline in retail sales for the month. However, excluding auto sales, sales were up 0.2 percent.

Total retail sales have been flat for the first few months of the year and consumer spending is the main driver of the American economy.

“Retail sales have been soft, but the lack of pricing is a significant issue,” said Sweet.

Big ticket price items that can be seasonally affected, like autos, can hurt the overall the retail sales report. But a strong rebound in auto purchases could lead to a more attractive retail sales report later this month.

5. Will Volkswagen ever recover?

Volkswagen AG is expected to see another month in the negative with a 2.3 percent decline in vehicle sales from April of last year. Volkswagen has immensely suffered from an emissions cheating scandal discovered September of last year. This month the automaker reported a net loss of $1.77 billion for 2015.

“They haven’t been really fast in throwing out any accommodations or resolutions for owners out there,” said Acevedo. “That’s really part of the problem.”

Acevedo said, like most manufacturers in the face of a crisis, it will be a long road to recovery for Volkswagen.

Five Things to Watch in March’s Durable Goods Report

By Yuxin Gao

The U.S. Department of Commerce will publish its first look at this month’s manufacturing sector performance at 8:30 a.m. on Tuesday this week. Economists expect long-lasting goods orders, a main indicator for U.S. manufacturing and business expansion activities, expands at a 1.9% rate, according to 76 economists’ median estimation for Bloomberg.

1. March was an important month

In January and February, factors like abnormal winter weather, early Chinese Lunar New Year complicated durable goods numbers. As the holidays ended and spring came, March’s durable goods new orders will start to show the real demand for U.S. manufacturing businesses.

“There is nothing we can point to and say things are better or worse because of some other factors, ” said Andrew Zatlin, founder of SouthBay Research advisory firm. “This is going to be a pure trend line. ” 

New orders for durable goods has gone down in three of the last four months, which made economists worry that the manufacturing  industry would shrink. Economists have been waiting for March’s report because it will give a hint of what the rest of the year will look like. 

2. Manufacturers postpone investment plans

Regional factory sector surveys showed businesses are holding on to their cash and are delaying capital projects. “We kind of anticipated it’s going to be a relatively soft quarter for capital spending,” said Scott Brown, chief economist at Raymond James financial service. A lot of business are waiting for further signs to tell them the next move. They have the cash to invest, but they have not received new orders yet.

Stagnated investment was led by the weak global economy, including Brazil’s financial crisis, European stagnancy, and China’s slowdown. In February,new orders for durable goods decreased a seasonally adjusted 3.1%, a sharp reversal from January’s 4.3% growth. This kind of back-and-forth has lasted for more than a year.

3. Larger and faster job losses

In March, manufacturing industries lost 29,000 jobs. Durable goods industries accounted for 24,000 of them. The job loss was mainly reported in machinery, computer and electronic products, and primary metals industries. Since reaching an employment peak in March 2015, durable goods manufacturers have cut a total of 68,000 jobs.

4. A weaker dollar may benefit exports

After getting stronger for nearly three years, the U.S. dollar began to weaken in mid-January. This improved  American  exports to its main trading partners –Canada and Mexico because the value of U.S. dollar decreased as compared to Mexican peso and Canadian dollar.

5 Oil prices decline can boost machinery orders

Oil prices hit bottom in February with the average price of $30 per barrel. In March the price rose to average $37-38 per barrel. Now it is close to $40, according to crude oil prices West Texas Index.

Oil-related manufacturers have been struggling for quite a while. Drilling investment has declined. But with the higher oil prices we might see some increase in machinery orders and fabricated metals orders in March’s report.


E-tailers Move Offline, Say There is No Substitute For Brick And Mortar

At a time when more and more retailers are moving online, some online only retailers are heading the opposite direction, opening brick and mortar retail stores to grow their businesses.

Karen’s Premium Toffee, a Sturtevant, WI based toffee confectioner opened its first physical retail store after nine years of online and wholesale business last week. Adore Me, a lingerie startup conceived of as an e-commerce site, recently opened it’s first permanent physical store, too. Bonobos, a menswear brand, Harry’s, a shave products company, Birchbox, a cosmetics brand, and Faherty Brand, an eco-friendly clothing company have also taken to the streets since launching exclusively online.

It isn’t that they are reverting to an old model, or that ecommerce shops aren’t profitable – indeed they are. Brick and mortar retail stores are still indispensable, but they are starting to take a different form, and serve a different purpose.

The founders of Bonobos, a menswear brand that launched online, never intended to open any brick and mortar stores. But since its inception, in response to customer feedback, it’s opened what the brand calls “Guideshops”, where guys can go to try pants, suits and more before they buy.

“We had no initial plans to open stores when began, but we had tons of inquiries from customers asking if they could come in and try on the product. The obvious conclusion was people still like to touch and try on items before they buy,” said Erin Ersenkal, Chief Revenue Officer at Bonobos.

At its heart the company is still digital though, and all orders are submitted through Product purchased at “Guideshops” is delivered, too. And unlike traditional brick and mortar stores, “Guideshops” don’t stock inventory in sizes, only samples. “This way we can showcase our assortment in a way that’s not overwhelming to shoppers and it’s easier to find product as you’re not thumbing through multiple sizes,” said Ersenkal.

Less inventory means less square footage. “Ultimately, the “Guideshops” and act as brand awareness tools for each other,” said Ersenkal.

Some successful online only brands are opening up shop to tap into hyper local communities. Others say their stores act as marketing tools, rather than profit generating centers. They’re strategically located and designed to drive traffic to companies’ ecommerce sites. Businesspeople in the retail sector agree that despite the associated costs and responsibilities of running a brick and mortar store, it’s worth it.

“There’s no replacement for seeing a new customer pick up your product and discuss it with you. That’s what happens in a physical store and it is difficult to recreate in an online experience,” said John Gillis, chief product developer at Harry’s Razors, a men’s shaving product company that launched online first, before opening a Manhattan barbershop in 2013.

The trend back to brick-and-mortar comes as retail sales as a whole are shifting online. In 1999, ecommerce retail sales made up 0.6 percent of all retail sales, according to seasonally adjusted economic data from the Federal Reserve. That number has risen or remained steady every year since, as more consumers turn to and rely on the internet for purchases across diverse categories of consumption. By the end of 2010, online sales made up 4.6 percent of total retail sales. The Fed’s most recent data, from October of 2015, shows that online sales account for 7.5 percent of total retail sales.

Economists say that this trend is unlikely to lose steam. “When you see company reports you see Amazon’s revenue growing 20 percent plus and a store like Macy’s is seeing revenues decline a lot. That shows a shift in terms of the venue for spending,” said Jim O’Sullivan, chief US economist at High Frequency Economics.

New companies are launching online for a number of reasons. Ecommerce allows fledgling brands to test a marketplace before committing substantial resources to a product they’re not sure will succeed. “There is more flexibility to change the digital product and experience versus a physical product and in store experience,” said Gillis. The online platform makes it easy to quickly roll out new iterations of products to consumers, he said.

But even those retailers that have entered the retail market online agree that web stores are not substitutes for brick and mortar. More and more retailers are realizing that the online experience has not, and is not likely to ever replace the experience of shopping in a physical store.

Faherty Brand, an eco-friendly clothing company, launched online before opening its first store in Soho because when it started, it didn’t yet have a full collection. “We started just with swim and if we had started with a store we wouldn’t have had enough merchandise to showcase,” said Kerry Faherty, one of the company’s co-founders.

Most people assume physical stores are much more expensive, but e-commerce has substantial costs attached as well. “The cost of acquisition of customers in a web-based only model is quite significant,” said Tom McGee, CEO of The International Council of Shopping Centers.

On the other hand, brick and mortar stores are valued for their unparalleled ability to convert shoppers into repeat customers. To draw customers to stores can drive additional sales. “Someone buys something online and collects it within a store and often times end up buying more,” said McGee. “Growth and profitability are really what are driving web retailers to grow their physical retail space,” he said.

Consumers have come to expect it all from retailers. They want to be able to browse and buy online, or go see and try on clothing before making purchases. And so retailers are adapting. Older existing brands are working to develop robust web presences while newer digital brands open up brick and mortar shops to build brand loyalty that’s developed through physical, in-store experiences.

Retail rents aren’t expected to drop anytime soon, either. Occupancy rates are at a pre-crisis high of 94 percent. “There is a legitimacy that exists by having a store that doesn’t exist online,” said McGee.

5 things to watch for in the consumer price index report

By Harini Chakrapani

The Labor Department’s monthly report on consumer price index (CPI), a measure of what Americans pay for everything from meat to medicines will be released Thursday, April 14 at 8.30 a.m. Economists will keep their eyes peeled, because the CPI is an indicator of inflation. According to Barclay’s forecast, the CPI is expected to gain 0.2 percent in March, indicating a stronger economy and foreshadowing an increase in interest rates.

Here are the 5 key highlights to watch out for in the report.

  1. Say goodbye to low gas prices:

Price at the pump is climbing. According to AAA’s fuel gauge report, the national average cost for a gallon is $2.057 compared to last month’s $1.917. The 14-cent increase might seem small, but it’s helping steady the economy.

For months, the CPI has been weighed down by the falling energy index. Last month, the CPI fell to 0.2 percent, while the gasoline prices plummeted by 13 percent, the lowest since February 2015.

Although, low prices can make drivers happy they are a drag on the economy.  The huge losses have already caused oil rigs to shut down and employees to lose jobs.

“The biggest surprise in this month’s report is that gas prices will be a major driver of overall CPI,” said Senior Economist Oren Klachkin at Oxford Economics.

Source: Bureau of Labor Statistics


  1. We are inflating, but we won’t burst

The core CPI that excludes the volatile energy and food indexes is expected to remain strong at 0.2 percent, following surges earlier this year.

January’s core CPI (0.3 percent) was the highest in four years and alleviated worries of a slowing US economy.

“Core prices were up 2.3 percent in February, the biggest yearly increase since the recession. We expect medical and rent prices to boost the core and continue the trend,” said Sophia Kearney-Lederman, economic analyst at FTN Financial.

High core prices mean Americans are paying more for rent and medical care, but inflation isn’t always bad news. Moderate inflation, indicates an increase in spending, production and consumption of goods and services, is needed to boost the economy and enable the Federal Reserve to achieve its target 2 percent inflation.

Economists predicted an eventual moderation in core prices.

“Last month’s increase in core had people starting to wonder if inflation is getting to be a bigger issue. But the core is likely to moderate due to rental costs,” said Sophia.

  1. Rent costs to stabilize

Rent costs have been responsible for driving the core inflation but are expected to stabilize.

Last month, the rent index ticked up to a seasonally adjusted 0.3 percent. Economists believed it to be an after effect of the improving job market, with demand growing from more employed Americans.

“We saw double digit growth in rents during the past year in San José, San Francisco, Seattle, Denver, Portland and Miami. However, we do forecast a slowdown, where rents are still going to be growing very quickly, but more in the single digits,” said Skylar Olsen, senior economist at online real-estate listing service Zillow.

Skylar attributed the slowdown to supply catching up to demand.

“There are so many new rental units. More and more landlords are having to offer concessions, and are slowing the pace of rent increases, because they are competing against more supply,” she said referring to the pick up in multi-family units including rental apartments but not condominiums that are owned by people.

  1. Getting well will continue to hurt

According to the Labor Department, medical care was one of the largest contributors to the rise of the core CPI last month.

Chairman and Chief Investment Officer of Hugh Johnson Advisors, Hugh Johnson predicted the medical care inflation to remain high at 0.3-0.4 percent in March.

Medical inflation has been outpacing overall inflation, growing at nearly twice the rate, over the past two decades.

The Journal of the American Medical Association (JAMA) revealed the main culprits for rising inflation in the healthcare industry through a 2013 analysis– price of drugs and medical devices, administrative costs, hospital care amongst others.

However, consulting giant Pricewaterhouse Coopers’ Health Research Institute is anticipating a slowdown in medical costs compared to last year.

Changes to government health insurance plans and the advent of virtual care where patients are monitored remotely instead of an expensive brick and mortar hospital setting, have been cited as factors that could drive down the pressure in medical care prices.

  1. Interest rates to rise

The Federal Reserve’s decision to raise interest rates has kept economists on tenterhooks. But now, economists are certain a hike is likely to happen in its September meeting.

“The core CPI has been strong, the domestic scene has been strong. If we maintain the current course, the Fed will raise rates in September,” said Oren Klachkin, senior economist at Oxford Economics.

The interest rate refers to the rate at which banks can lend money to each other.

The Fed needs to raise it to achieve its target 2 percent inflation to maintain a healthy economy.

Last December, the Fed approved an interest rate hike from 0.25 to 0.5 percent following a seven-year period of near zero interest rates- devised to encourage borrowing and spending and help America recover from the financial recession of 2008.

Besides the core CPI, other economic indicators have also registered positive gains including the labor market, and the personal consumption expenditure (PCE) that also measures price changes in consumer goods and service and is the Fed’s preferred index to determine inflation.

“The Fed will want to want make sure the economy is on a strong footing before the rates are raised by another notch,” said Oren.

Measuring the Economy