Rural Iowa retail woes: Malls struggle as new wave of store closures hits small towns

Donnelle Eller
The Des Moines Register

Ottumwa's Target is gone.

So is Kmart, MC Sports, JCPenney, Vanity and soon Herberger's.

"The mall is pretty sad," says Amanda Cain, a teacher and mother. "Once Herberger's closes, we'll have no anchors."

Herberger's is closing at Ottumwa's Quincy Place Mall in Ottumwa, Iowa, shown here, Wednesday, May 23, 2018.

About two-thirds of Ottumwa's Quincy Place Mall will be empty with Herberger's loss, one of 15 Bon-Ton stores closing in Iowa this summer. Most of them are Younkers stores. 

Bon-Ton, Toys R Us, MC Sports and others are bankrupt. JCPenney, Kmart and other department stores are closing unprofitable stores in their struggle to survive against growing online competition.

National retail distress is emptying rural regional malls, experts say. But long-term economic deterioration is driving their inability to bounce back: Fewer jobs and fewer people mean less money spent on TVs, couches and clothes.

Ottumwa and most other small Iowa cities have failed to recover the jobs lost in the recession, said David Swenson, an Iowa State University economist.

Wapello County, where Ottumwa is the biggest city, with 24,450 people, had 3 percent fewer jobs last year than in 2008.

Even with mostly steady employment over the past two years, the city's retail sales have tumbled 6.8 percent.

Buying power follows workers, who are moving to Des Moines, Cedar Rapids and other metro areas for jobs. "They're going where the economies are stronger and they can make more money," Swenson said.

► RELATED:How Iowa's midsize cities have been left behind

Retail sales, for example, spiked 5.4 percent over the past two years in the Des Moines metro, and jobs have grown about 11 percent.

Jordan Creek and other metro malls will barely feel the loss of Younkers, with the space quickly filled with new retailers, Swenson said.

"The only alternative left in many of these rural areas is Walmart," he said.

Amanda and Wes Cain, and children Lydia Roling, 12, and Kayden Cain, 8, at Ottumwa's Quincy Place Mall in Ottumwa, Iowa, Wednesday, May 23, 2018.

Cain, who's not a Walmart fan, does most of her shopping at Kohl's in Ottumwa.

"Whenever we can, we'll do an out-of-town shopping trip, spend a Saturday and do our shopping in Des Moines. ... We make it a fun outing," Cain said, whose family hits Jordan Creek and Valley West malls, TJ Maxx and other Des Moines-area stores she wishes were closer.

"It would be nice just to run to the mall whenever we want and find the stores we like," she said.

Too soon to say malls are dead

With the exception of Burlington, no other small Iowa city saw greater retail losses than Ottumwa over the past two years.

And a portion of Burlington's 10 percent tumble can be attributed to construction work ending on the Iowa Fertilizer Co. plant, a $3 billion project that drove annual sales to a $345 million high in 2016 before falling.

Many small urban centers are suffering, said Liesl Eathington, an ISU economist.

Ottumwa's Quincy Place Mall in Ottumwa, Iowa, Wednesday, May 23, 2018.

Fort Dodge, Mason City, Clinton, Spencer and Keokuk are among small Iowa cities that posted annual retail sales losses, based on ISU's inflation-adjusted data.

"It’s too soon to say the mall is dead," Eathington said. "But we may see a shakeout when there are fewer and fewer of them."

► RELATED:Sears and Kmart announce new round of store closings

Swenson said retail in small cities is likely struggling because manufacturing has suffered, both statewide and in rural Iowa. 

Iowa factories still have been unable to replace 5.1 percent, or 11,500, of the production jobs lost in the recession a decade ago, even though total state employment has climbed 3.3 percent, adding about 50,000 jobs.

Wapello County is still down about 500 factory jobs, or 12.6 percent, even with strong manufacturers that include Deere & Co., the farm equipment manufacturer, and JBS USA, a pork processing plant.

Overall, the county has lost a similar number of total jobs.

"These communities and surrounding counties aren’t as strong. They're not holding their own," Swenson said.

Power shifting to consumers

Online sales spiked 16 percent last year over 2016, while total sales climbed 4.4 percent, the U.S. Commerce Department reported.

Amazon and other e-commerce businesses made up about 9 percent of total sales, an ever-growing percentage, the data show.

"These are challenging times for retailers. ... There's a clear shift in power from the retailer to the consumer," said Mark Mathews, the National Retail Federation's vice president of research and development.

Ottumwa's Quincy Place Mall in Ottumwa, Iowa, Wednesday, May 23, 2018. The southeast Iowa town's retails sales over the past two years have slumped 6.8 percent, while fast-growing Des Moines-West Des Moines spiked 5.4 percent.

"When I was younger, when I wanted to buy something, it was a question of what was open within driving distance. Now you can buy anything, anywhere," he said.

Store closings reflect shopping decisions that consumers have been making for years, Swenson said.

"We’re demonstrating ... where we want to do our shopping," he said.

Ottumwa and other small cities are losing workers to Iowa's bigger metros, Swenson said.

► RELATED:Iowa has some of the nation's fastest growing housing stock. Yet 35 counties are still shedding homes.

For example, Des Moines and other metro areas saw a 4.4 percent gain in workers ages 35 to 44 from 2010 to 2016, Swenson's research shows.

Ottumwa and other small cities saw a 5.2 percent decline.

People are "flowing strongly into metropolitan areas of Iowa," creating losses in micropolitan areas, he said. The Census Bureau defines micropolitan areas as having 10,000 to 50,000 people.

"You're truly getting a shift in people's preferences on where they want to work and live," Swenson said. "The metro economies are outbidding the micro-economies."

► MORE:This map shows the stark reality of rural Iowa's population loss

New hope for downtown?

Several downtown Ottumwa stores are still empty, their windows boarded up.

Trash fills some. Others are used for storage.

But downtown Ottumwa is moving from blighted to revitalized.

Many revitalization grants are available to downtown building owners,such as facade grants to modernize store fronts in Ottumwa, Iowa, shown here, Wednesday, May 23, 2018.

Ottumwa has snagged about $10 million in state and federal grants to change it, mostly over the past three years, said Fred Zesiger, the city's Main Street director.

Private owners also have invested about $16 million to peel decades of ugly metal off historic brick facades, renovate aging buildings and invest in second- and third-story apartments.

They'll have about 100 apartments when the work is completed. "People thought these buildings were worth saving, and they were right," Zesiger said.

Redevelopment of downtown gives Ottumwa leaders some opportunity to boost shopping, when most of the control lies with large corporations, said Holly Berg, an Ottumwa council member.

"This is something we can take into our own hands, instead of being at the mercy of national chains," Berg said.

City Council Member Holly Berg and Main Street Director Fred Zesiger in downtown Ottumwa, Iowa, Wednesday, May 23, 2018.

"Just about every town of our size is having trouble. ... It's not just Ottumwa," he said. 

Access to shopping is important to keeping talented workers, along with good-paying jobs, schools, parks, trails and entertainment, she said.

"I think a Target support group formed" after the chain closed its doors a couple years ago in Ottumwa, Berg said. "It's not just shopping. It's a chance to spend time with friends and hang out."

People want to be part of a moment

Danielle and Blaine Rupe considered opening up their bagel shop only in downtown Ottumwa.

They taught themselves how to make bagels after agreeing to sell them at a "pop-up" business Zesiger and others organized to let entrepreneurs test their ideas.

The pop-up became a permanent business six months later. "There's a lot of history, a lot of unused space downtown that's beautiful," said Danielle Rupe, 30.

► RELATED:Rural Iowa has a housing crisis. Here's how a handful of communities are solving it

► RELATED:How this tiny Iowa town banded together to save rural homes

Losses at the mall create opportunities downtown, Zesiger said.

"Young people want experiences, unique products. They don't want one of 10,000 shirts they can get at the mall," he said.

Lindsey Newland, Canteen Lunch in the Alley manager in Ottumwa, Iowa, Wednesday, May 23, 2018.

Building on an Ottumwa institution, the 91-year-old Canteen restaurant, leaders have commissioned artists to create psychedelic murals and modern sculptures for the alley leading to the famous loose-meat eatery.

Canteen manager Lindsey Newland agrees that people want a unique experience, whether eating or shopping.

"People want to be part of a moment," said Newland, whose mother and stepfather now own the restaurant.

Artwork to spruce up alleys in downtown Ottumwa, Iowa, Wednesday, May 23, 2018.

Disheartening to see another store go

Cain, the Ottumwa mom and teacher, said she likes the new restaurants, shops and businesses moving into downtown.

Combined with trails, concerts and other downtown events, it's a fun place for Cain's family.

But Cain also wants a vibrant mall. Now, it has only a few remaining stores she and her husband, Wes, would make the trip for.

He likes the Hibbett Sports. She likes Bath & Body Works. Their daughters, Lydia, 12, and Kayden, 8, like Claire's, a jewelry and accessories retailer that also has filed for bankruptcy protection.

A Hobby Lobby is nearby, and Bubba-Q's is a favorite with locals.

Dunham's Sports, slated to open this summer, will help.

Replacing big retailers becomes more difficult in smaller communities, said Scot Snitker, national portfolio manager at Lexington International Realty, the New Jersey company that owns the Ottumwa mall.

His company is looking to attorneys, doctors and other service providers to help fill space. And it's recruiting entertainment providers — mini golf in Ottumwa, paintball in a Minnesota mall and a hockey rink in a South Dakota mall.

"There are plenty of retailers that are expanding. But they require a bigger population base, higher earnings," Snitker said. "So we just have to get more creative" in smaller markets.

Cain said she believes "the community is trying very hard" to attract new retailers. "It's just a little frustrating and disheartening to see another business go."