The Bon-Ton Stores will become the latest casualty in a retreat from brick-and-mortar retail, after a savior failed to show up to a bankruptcy auction this week.
The company, which operates department stores in 24 states, was headed for the chopping block on Wednesday after two liquidation firms were the only bidders to step forward at a bankruptcy hearing held the day before. The company has a strong presence in Wisconsin, where it has nine stores and employs 2,255 people.
The impending closings will present real estate difficulties, since many Bon-Ton stores anchor shopping malls that have long been struggling to reinvent themselves amid the rise of online retail. It’s still unclear how mall owners and developers will fill vacant Bon-Ton stores, said people at a commercial real estate conference held on Wednesday at the Potawatomi Casino & Hotel in Milwaukee.
People in the industry are still looking for a clear business plan that can be expanded and copied to provide a replacement for the big-box chain, said Tracy Johnson, president and CEO of the Commercial Association of Realtors of Wisconsin.
But anyone charged with salvaging these anchor sites already understands that big-box stores may be incompatible with changing shopping habits, Johnson said. So even though Bon-Ton’s likely liquidation is coming as unwelcome news, it’s not really a surprise.
“I would say from a mood perspective, people are not saying doom and gloom on this,” Johnson said. “This is an evolution. There were a lot of retailers that just didn’t fit with today’s world.”
Two liquidation firms, Great American Group and Tiger Capital Group, won Tuesday’s auction after Bon-Ton failed to find a bidder who would agree to try to keep its business afloat. A bankruptcy court court was expected to approve the sale and liquidation details as soon as Wednesday.
The Bon-Ton Stores—which has dual headquarters in Milwaukee and York, Pennsylvania—was operating 260 stores largely in the Northeast and Midwest, when it filed for bankruptcy in January.
“While we are disappointed by this outcome and tried very hard to identify bidders interested in operating the business as a going concern, we are committed to working constructively with the winning bidder to ensure an orderly wind-down of operations,” said president and CEO Bill Tracy.
The 160-year-old company has weathered economic recessions and depressions, but it couldn’t withstand the ascendance of electronic retailing. The shift toward e-commerce, led by Amazon.com Inc., has claimed many of the sorts of retailers that are commonly found at shopping malls, including the retail behemoth Toys R Us.
“Obviously we’re concerned about Bon-Ton. We’re disappointed that only the liquidators came forward,” Milwaukee Mayor Tom Barrett said Tuesday. “We still have a lot of unanswered questions. We clearly want to make sure we’re doing everything we can to continue to have the employment.”
In January 2017, city officials approved a deal with Bon-Ton offeirng the company a $1.9 million forgivable loan to support $4.4. million worth of renovations at the company’s downtown headquarters.
In exchange, the company promised to keep its corporate office, which employs about 700 people, and its Boston Store location at the Shops of Grand Avenue mall for 10 more years.
But Bon-Ton’s bankruptcy casts doubt on that agreement. Barrett said city officials are confident they’ll be able to recover much of the incentive if Bon-Ton can’t hold up its end of the bargain. The company has used about a quarter of the loan so far, he said, leaving about $1.4 million in an escrow account that the city will most likely be able to retain.
“Of course I’m concerned about (the incentive), but I think the more pressing concern is the long-term viability of the company,” Barrett said. “I think we have protections for ourselves with the money.”
Meanwhile, Bon-Ton’s bankruptcy threatens to blow holes in malls throughout Wisconsin and beyond.
The rash of vacancies will require realtors, developers and others to think of new ways to fill those stores. Whatever response is attempted will carry plenty of risk, said Jon Hegwood, of Greenwood Partners, a Chicago-based commercial real estate firm.
“That’s the next biggest question in all of retail is finding creative solutions to fill vacant big box retail,” Hegwood said. “I think you’re finding more and more that mixed-use developments are certainly the way to go and have been more and more prevalent recently. I think you’ll see more and more of that.”
An oft-cited example of this type of development can be found at the vacant Sears store anchoring the Brookfield Square mall. Plans call for two restaurants to replace the retailer’s 160,000-square-foot space, including WhirlyBall, a bar and restaurant that offers bumper cars and other amenities, and Uncle Julio’s, a Mexican restaurant. A Marcus BistroPlex is also planned for the mall.
Other companies have begun to blur the line between industries, too, as a way to get more people into their stores.
Another retail chain, Kohl’s, has begun clearing space in 300 of its 1,100 stores to make room for the discount grocer Aldi.
But it could be years before mall owners and developers identify the best replacement for vacant big box stores like Bon-Ton, Hegwood said. And although some large mall chains may have the bargaining power they need to replace vacant stores, smaller shopping centers may not. That could lead to a patchwork of solutions.
One low-cost plan might call for replacing big box stores with gyms, or health centers.
“The stickiness or sustainability of that? I’m not sure,” Hegwood said. “You’ll have some test runs going on.”