The Vanguard has a new home, please update your bookmarks to

Thursday, January 08, 2009

Gottschalks Potential Bankruptcy Concerns City

The headlines from a few days ago was that Gottschalks is likely to run out of money by the end of the month. Where does that leave Davis which has had a Gottschalks store in the University Mall since 1999? Well Gottschalks is currently the only department store in Davis. And with Mervyn's going bankrupt and liquidating its stores, it may be the end of the line for such mid-range stores that are stuck between the low-line big-box retail stores like Target and Wal-Mart but a step below the higher end stores like Nordstrom's or Macy's.

This would be particularly bad news for the County Fair Mall in Woodland. Target has moved from that Mall to the larger location off Road 102 by Costco. That move was planned, but now coincides with the loss of Mervyns and now it appears Gottschalks.

The impact for Davis is not good either, according to economic development director, Sarah Worley who told the Davis Enterprise yesterday:
"The city is gravely concerned about the difficulties the Gottschalks company is having and any possible closure of the Davis store. The store is a valuable community amenity as an important anchor for the University Mall shopping center, in meeting local shopping needs and for its generation of sales tax revenue. The city is seeking more information about the situation for the Davis store and will continue to monitor its status."
And yet that location, in a way hidden in the back of the Mall, in a very small store, has never been that great for Gottschalks.

Most interesting perhaps is the fact that one of the culprits in the downfall of stores like Gottschalks is the rise of big-box retail.
"The last few years have also been grueling for many regional mid-range retailers around the country, which have had trouble competing against national big-box discount stores like Wal-Mart and high-end department stores like Nordstrom's."
The irony is that the city laments the loss of a store but their policies paved the way for its demise. The fact of the matter is that even under better circumstances, Gottschalks was probably doomed in Davis the moment that Target was allowed to come in. When all things are even, a store like Gottschalks probably was going to have trouble competing against a Target. But things of course were not even.

Gottschalks was stuck in the back of a small location, with a small inventory. Target would be able to severely cut into their market in Davis. The end of Gottschalks is probably coming a bit faster because of the economic downturn, but it was probably inevitable.

Undoubtedly reactions to this will be mixed. For people like me, I get a good percentage of my clothing at Gottschalks--you can purchase decent but still affordable clothing at its locations. Its loss would leave Davis without a department store. To me, Target does not fill that void, although I suppose it does people a place to get cheap clothing.

In the end, the question will invariably be who else is going to become a culprit to Target. Are we going to lose a number of smaller chain stores? Are we going to lose a number of locally owned stores? Is Target coming to town going to reduce our shopping options rather than expand them? Is it going to force the city to bring in other big-box stores to compete if the city wants to have a variety of options rather than be a one-shop town?

These are all questions that have been pondered for quite some time, but given the economy, given the precarious nature in which a lot of merchants are living these days, the threat is becoming even more real right now. Target is about to pour their foundation and then we will see what the real cost of bringing in Target to Davis is. The timing probably couldn't be worse given the shape of the economy. Many places that might have survived in better economic times will probably see this as their death knell.

---David M. Greenwald reporting