Kansas City Regional Retail Trends Report 2020
How does the nine-county Kansas City region experience national changes in the retail industry?
Special note
This report is not primarily focused on the year 2020 and the effect of the COVID-19 pandemic upon retail and adjacent industries in the 9-county Kansas City region. Instead, it focuses on historical data that shows trends for retail and adjacent industries. It does contain some limited data for the year 2020; please see the section in this report entitled "Effects of COVID-19."
Executive summary
Notable findings from this report include the following:
- Retail trade employment has fluctuated nationally and regionally, and is beginning a downward trend. Long-term, establishments in this sector are increasing nationally but decreasing regionally.
- Both employment and establishments in the "services" sector are rising steadily, both nationally and regionally.
- The supercenter and warehouse club sub-sector of the retail trade sector could be important to watch to understand changes to retail in the nation and region. Nationally, supercenter and warehouse club employment has risen significantly and consistently. In the Kansas City region, it fell dramatically before recovering dramatically to pre-recession levels.
- Supercenter and warehouse club employment has exceeded department store employment both nationally and regionally.
- The electronic shopping and mail-order houses (ESMOH) sub-sector has seen high percentage gains in both employment and establishments, both nationally and regionally.
- Both national sales tax collections and regional taxable sales have recovered from the recession, though the region's taxable sales have plateaued.
- Cass, Platte and Ray counties have retail trade employment proportions that exceed the region's proportion of retail trade employment in 2019, possibly indicating "overexposure" that sector. Cass County also exceeds the region in its proportion of "services" employment. Wyandotte County shows smaller proportions in both sectors.
- By pull factor, Platte and Johnson counties pull in more trade than they lose. Clay, Jackson and Wyandotte counties lose slightly more trade than they pull in. Cass, Miami, Leavenworth and Ray Counties all lose significantly more trade than they pull in.
- National retail trade employment levels have mostly recovered after the losses sustained during the early months of the COVID-19 pandemic. Regional retail trade employment levels have exceeded those of January and February 2020.
- Kansas-side tax data showed that the two more populous counties of Johnson and Wyandotte were relatively more susceptible to sales tax loss in 2020 than the two less populous counties of Leavenworth and Miami.
Introduction
Why a report on retail?
Retail is a sector that is important to many people, but changes considerably over time. The presence of retail stores, the way they are built, and the health of the industry contribute to how we use land and transportation. Local and state governments are also concerned with the health of the retail industry, as taxes from retail sales give those governments an important source of income.
Data in this report can give city planners, managers and elected officials an idea of the trends in the economy, which may inform their decisions according to their values. It could also lead to different questions and conversations around specific topics, such as how a jurisdiction currently uses land for retail.
The big question
This report seeks to answer the question: What is the nine-county Kansas City region's exposure to changes in the retail industry? It will answer this question by comparing the region to the whole United States through several smaller questions, such as:
- What trends are we seeing in retail trade?
- What trends are happening in services often included in retail developments?
- Do supercenters and warehouse clubs have an outsized impact on retail, compared other department stores and electronic shopping?
- What are the trends for sales taxes?
- How have social distancing measures put in place in response to the COVID-19 pandemic impacted retail?
This report will also compare the nine counties in the Kansas City region to each other in certain respects.
What is the nine-county Kansas City region?
MARC is a nonprofit association of city and county governments and the metropolitan planning organization for the bistate Kansas City region. Nine counties are members of MARC:
The nine-county Kansas City region
- Johnson County, Kansas
- Leavenworth County, Kansas
- Miami County, Kansas
- Wyandotte County, Kansas
- Cass County, Missouri
- Clay County, Missouri
- Jackson County, Missouri
- Platte County, Missouri
- Ray County, Missouri
When statistics are shown for the Kansas City region they include data from the above counties.
What counts as "retail"?
This report uses the North American Industry Classification System (NAICS) to find the appropriate categories of industry to review. NAICS uses a numeric code system to classify industries. The shorter the code, the broader the industry; the longer the code, the more specific the industry.
The NAICS sector code 44-45 is called "retail trade." It includes subcategories such as:
- Motor vehicle and parts dealers
- Furniture and home furnishing stores
- Electronics and appliance stores
- Building material and garden equipment and supplies dealers
- Food and beverage stores
- Health and personal care stores
- Gasoline stations
- Clothing and clothing accessories stores
- Sporting goods, hobby, musical instrument, and book stores
- General merchandise stores
- Miscellaneous store retailers
- Nonstore retailers
What is included in "services"?
The International Council of Shopping Centers (ICSC) wrote about the effect of service industries on shopping centers in a Jan. 15, 2020, report, called, "Retail Real Estate Transformed: How the Emergence of Services Has Changed Tenant Mixes and Reshaped Shopping Centers." Our report uses same NAICS classifications for "services" as the ICSC report, which includes:
- Motion picture theaters (NAICS code 512131)
- Wireless telecommunications carriers (except satellite) (517312*)
- Amusement arcades (713120)
- Fitness and recreational sports centers (713940)
- Restaurants and drinking places (722)
- Repair and maintenance (811)
- Personal and laundry services (812)
*This category has been filed under different NAICS codes for the 2002 edition of the NAICS manual (517212), the 2007 and 2012 editions (517210), and the 2017 edition (517312).
What about supercenters, warehouse clubs and electronic shopping?
These are all subsectors of retail trade (44-45). The categories compared in this report include:
- Department stores (NAICS code: 45221)
- Warehouse clubs and supercenters (452311)
- All other general merchandise stores (452319)
- Electronic shopping and mail-order houses (454110)
Retail trade
Serendipity Antique Shop, Independence, Missouri
The retail trade sector is the starting point for looking at the state of retail in the country or the Kansas City region. We can compare those two different scopes through employment and establishments data.
National retail employment fluctuates over time
Retail trade employment in the country has been on an upward trend in the country since its lowest point in the recession in 2010, though it is coming back down from its high point in 2017. Considering the curves at both the start of the data in 2001, and the end of the data in 2009, retail trade employment levels could simply fluctuate, even without the crises of the Great Recession and COVID-19.
Since the start of the data, retail trade employment has increased nationally by 2%. Since the lowest point of the recession in 2010, employment has increased 7%.
Regional retail trade employment trends look similar to the nation
Retail trade employment in the Kansas City region was already on a downward trend when the recession hit. However, the recovery curve in the region mirrors that of the nation with the lowest point occurring in 2010, the peak occurring in 2017 and the line sloping back downward again by 2019. Like the nation, retail trade employment in the Kansas City region may simply have its peaks and troughs, even without events that cause economic hardship.
From the start of the data through 2019, retail trade employment in the Kansas City region has fallen by 0.6%. From the lowest point in 2010 to the latest year of data, it has risen by 8%.
Retail trade establishments see steady increase in the nation over the past few years
Nationally, retail trade establishments have not recovered to prerecession levels, but this data shows that losses in the recession followed a steady increase in establishments. The increase in retail trade establishments since 2014 has been at a slower, steadier rate.
The above analysis could be partly the product of the scale at which the data is portrayed. Since the start of data in 2004, national retail trade establishments have increased by 1%. Since the lowest point in 2011, they have increased by 2%. Placed against other similar data, these curves would flatten.
Regional retail establishments trend downward
This data shows that regional retail trade establishments were declining in the region prior to the recession. While there has been a recovery since 2013, another recent decline in the past couple of years, combined with changes and outside shocks to the industry, raise the question of whether the new year-to-year range of retail establishments for the Kansas City region will simply stay lower than it was in 2004.
From 2004 to 2019, the number of retail trade establishments in the Kansas City region has decreased 3%.
Services
Sunflower Embroidery, Bonner Springs, Kansas
A Jan. 15, 2020, report from the ICSC indicated that services are becoming a more important share of the tenancy of shopping centers. This report uses the ICSC's definition of "services" to compare the national trends in service employment and establishments to trends in the Kansas City region.
Nationwide services employment climbs
Unlike the retail trade sector, the services sector did not have to spend much time regaining what it lost. Instead, it reached nearly prerecession levels by 2011 and has continued to rise until the latest data in 2019.
From 2001 to 2019, services employment rose 33%. Since 2009, the lowest point during the recession, services employment rose 23%.
The region sees growth in services employment
Unlike the national services employment trend, the Kansas City region did not see as steady growth in services employment before the recession. Recovering from the recession, however, the region has enjoyed a trend similar to the nation, which shows a quick recovery and growth in services employment every year to the present data.
From 2001 to 2019, services employment in the region rose 23%. From 2010 to 2019, services employment rose 19%.
National services establishments steadily increase
Similar to the national trend for services employment, the national trend for services establishments has been one of steady increase. Levels of services establishments were relatively unaffected in the recession.
Since 2004, the number of services establishments has increased 22%.
Regional services establishments grow along with the nation
The region's charted line towards a higher number of services establishments shows more variance in the rate of increase but the result is the same: a higher number of services establishments at a level that has risen ever higher since 2009.
Since the start of the data in 2004, regional services establishments have increased 16%.
Supercenters and warehouse clubs
Target in Overland Park, Kansas
Why look at supercenters and warehouse clubs specifically? An academic article in the Journal of Economic Perspectives by Hortaçsu and Syverson (2015) showed that retail formats such as warehouse clubs and supercenters are having a substantial impact on the retail trade sector.
Not only should we expect physical formats to remain a substantial factor in the retail sector over the foreseeable future, over the most recent past decades a particular physical format has arguably had an even greater impact on retail than has e-commerce. That format is the warehouse club/supercenter. (Hortaçsu and Syverson, 2015)
Since the Hortaçsu and Syverson study uses NAICS codes, we can use the same data sources to examine and compare national trends for supercenters and warehouse clubs to those in the Kansas City region.
Supercenter/warehouse club employment climbs in the nation
Much like services employment in the United States, employment at supercenters and warehouse clubs has an upward trend line, experiencing only a relatively small dip for the recession. In the past three years of data (2017-2019), employment in this sector has declined. However, even after that decline, there has been a 68% increase in warehouse club and supercenter employment from 2001 to 2019.
Kansas City region supercenter and warehouse club employment recovers to prerecession levels
The trend for supercenter and warehouse club employment in the Kansas City region looks much different than the trend at the national level. After a relatively dramatic fall in the recession, employment experienced an equally dramatic rise from 2012 to 2013. This seems to be one sector where trends in the Kansas City region differ significantly from national trends.
From 2001, Kansas City region employment in this sector has risen 18%. From 2012, the point before the dramatic rise, to 2019, employment rose 84%.
Nationwide supercenter and warehouse club employment rises; department store employment declines
Since the Hortaçsu and Syverson paper compares employment in the supercenter and warehouse club sector to department stores and general merchandise stores,* we do the same here to better compare trends with the Kansas City region. The data shows that nationwide department store employment trended downward since 2001, and in 2013 finally fell below supercenter and warehouse club employment, which has trended upward. Employment for all other general merchandise stores has remained largely static, with only slight increases or decreases.
*Hortaçsu and Syverson track discount and nondiscount department stores separately using past versions of NAICS codes; the 2017 NAICS manual only lists "department stores," so that is what this report tracks.
Kansas City region supercenter/warehouse club employment rises above department store employment
In the data for the Kansas City region, the employment totals for department stores dives below that of supercenters and warehouse clubs from 2012 to 2013, just as they do in the national data. The difference for the Kansas City region is that the rise in warehouse club and supercenter employment and the corresponding drop in department store employment is sharper than it is in the national data. From 2012 to 2013, warehouse club and supercenter employment rose 71% in the Kansas City region, versus 9% nationally. In the same time period, department store employment fell 43% in the region versus falling 11% in the nation.
Nationally, "other" general merchandise establishments rise, supercenter and department stores stay constant
Despite the fluctuations in department store and supercenter/warehouse club employment, the number of establishments that employ those people has changed relatively little over the years. Establishments in the "all other general merchandise stores" sector, however, have been rising steadily.
The data also shows us that the number of "other" general merchandise establishments far exceeds both of the other categories. Since the employment in "other" general merchandise stores is far less than the other categories, we might conclude that each "other" general merchandise establishment employs a relatively smaller number of people.
Regional trends in establishments for general merchandise sectors similar to the nation in past few years
The Kansas City region has seen a steady increase in "other" general merchandise stores since 2009, following a trend of slight decrease. In contrast, the number of department stores and supercenters/warehouse clubs have seen very little net change from the beginning of the data to the end. The data shows that there was a brief period between 2010 and 2014 during which department store establishments increased and supercenter/warehouse club stores decreased. However, the most recent data looks similar to the start of the data, before the recession.
Electronic shopping (ESMOH)
Even though Hortaçsu and Syverson (2015) showed that looking at the supercenter and warehouse club sector is important to understand changes in retail, it is still worthwhile to observe the impact of electronic shopping on retail. Under the NAICS system, this report shows the data for sector 454110, electronic shopping and mail-order houses (ESMOH).
National ESMOH employment on an upward trend
National employment in the ESMOH sector has been on an upward trend since 2003. Its increase has been particularly sharp since 2010, only plateauing after 2017. From the start of data in 2001 to the end in 2019, national employment in this sector has risen 70%.
Kansas City region ESMOH employment has fluctuated, but is on a general upward trend
ESMOH employment data for the Kansas City region looks much different than it does for the nation. Although both the region and the nation have seen an upward trend in ESMOH employment, the Kansas City region has fluctuated much more in its employment levels, such that year-over-year decreases in employment after 2008 do not seem directly related to the recession. From 2001 to 2019, employment has risen 84%.
ESMOH establishments see steady rise nationwide
Establishments in the ESMOH sector have steadily risen nationwide. The gradual slope of the curve on this chart may mask the high percentage increase in establishments: from 2004 to 2019, the number of ESMOH establishments has risen 210%.
Kansas City region sees steady rise in ESMOH establishments
Similar to the United States, the Kansas City region has an upward trend in ESMOH establishments. However, the region has seen more fluctuation from year to year, even seeing a decrease in establishments from 2017 to 2018. The Kansas City region's percentage increase in ESMOH establishments, while very high, is not as dramatic as the nation's: 85% from 2004 to 2019.
Independence Center, Independence, Missouri
Sales taxes and taxable sales
The last point of comparison between the nation and the Kansas City region is in the realm of taxes. For the nation as a whole, data for sales tax collections was available. To show data for the Kansas City region, this report instead uses taxable sales in order to harmonize the different counties' sales tax rates at different time periods and combine the county data into regional data. This report takes the liberty of using sales tax collections and taxable sales as proxy measures for each other, and compares nationwide sales tax collections and Kansas City region taxable sales side-by-side. For many governments, sales taxes are an important source of revenue, and the trends in sales tax revenues have implications for the services that governments can provide.
National tax collections rising after recession
Even after adjusting for inflation, the country has seen a continued upswing in sales tax collections since the lowest point of the recession, which in this data is 2010.
From 2000 to 2017, the country's combined state and local sales tax revenues are up 27%. Since 2010, the lowest point in the recession, revenues are up 20%.
(In the scale of the chart, G = billion)
Kansas City region taxable sales rise above prerecession levels
Kansas City region taxable sales began to fall shortly before the recession, but the recession completed a drop of over $2.5 billion in taxable sales. The economy recovered, however, and taxable sales are sitting $1 billion higher in 2019 than they were in 2006, a 3% increase. From the lowest point in the recession, 2010, to 2019, taxable sales increased 13%.
(In the scale of the chart, G = billion)
County statistics
Legends Outlets, Kansas City, Kansas
This report has taken a look at several sectors related to retail at the national and regional levels. It's time to ask the question: what does the retail landscape of each of the region's counties look like in relation to each other? This section will aim to show how important certain sectors are to county economies, and offer a picture of trade between counties.
How important was the retail trade sector to each county?
The United States and the Kansas City region had approximately the same share of retail trade employment in 2019: 10.2% of all national employment and 10.1% of all regional employment is in the retail trade sector. This chart shows the share of retail trade employment by county and uses the Kansas City region share as a baseline to show exposure. If a county exceeds the region baseline, it may mean that the county is "overexposed" in the retail trade sector, and could experience more hardship during economic crises. Cass, Platte, and Ray counties show this kind of overexposure. Wyandotte County, on the other hand, shows a noticeably smaller share of employment compared to the region baseline.
How important is the services sector to each county?
Since services is the other large industry sector covered in this report, it's worth looking at the employment shares for each county within the Kansas City region. The share of services employment to total employment is similar for the nation and the region: 10.7% for the nation and 10.3% for the region. Cass County is the area that noticeably exceeds the Kansas City region baseline at 14%. Wyandotte County is again underexposed in the services sector at 7.6% of total county employment.
Readers may find it interesting to think about how vulnerable overexposure in the services sector may leave a jurisdiction. This sector experienced relatively smaller losses compared to the retail trade sector during the recession. Time will tell how it weathers the social distancing measures of the COVID-19 pandemic.
Kansas City region counties fall into three broad groups for gaining or losing trade
Pull factors are a measure of how much trade stays within or leaves an area relative to a larger area. If a county in the Kansas City region has a pull factor of less than 1.0, its residents may be shopping elsewhere in the region more often. If a county has a pull factor of greater than 1.0, it suggests that people are coming in from other counties to shop more than they are leaving the county to shop.
This chart tells two stories about counties' pull factors: 1) Each county's pull factor has not changed greatly over time, and 2) counties fall into three broad groups. Platte and Johnson are the counties that pull in more trade than they lose. Clay, Wyandotte and Jackson are the counties that are close to trade parity (a pull factor of 1) within the region, but fall a little short. Ray, Leavenworth, Miami and Cass counties lose significantly more trade than they bring in.
Effects of COVID-19
Power & Light District, Kansas City, Missouri
Measures taken nationally and locally to mitigate the spread of the COVID-19 virus in 2020 were centered around reducing physical densities of people, often called social distancing. Since high densities of people is one of the factors that retail thrives on, the economic health of the retail trade sector, other sectors featured in this report, and the tax revenue they generate is of concern for many. This section explores some data that is available, giving a small window into what has been happening in the Kansas City region and nationally in the year 2020.
National retail trade employment fell dramatically, but has since recovered
For many, social distancing measures began in March. The Bureau of Labor Statistics data shows that this resulted in a loss of 2.2 million retail trade jobs from March to April. However, data since April has shown retail trade employment rising quickly. Preliminary numbers for November show the retail trade sector is only about 86,000 jobs shy of January employment levels.
Kansas City metro area retail trade employment recovers and exceeds January levels
According to Bureau of Labor Statistics data on the Kansas City MO-KS metro area (which may cover a larger area than the nine-county Kansas City region), retail trade employment experienced a steep drop from March to April, similar to the national data. However, the Kansas City metro was exceeding January retail trade employment levels by August, and preliminary numbers for November show a 5% increase over January. In this metric, the Kansas City metro area seems to have recovered. However, care should be taken to acknowledge that this data does not cover the whole picture of the local retail trade landscape.
Less-populous Kansas-side counties lost little state sales tax collections compared to 2019
As social distancing measures were implemented, one concern was that local governments would take in much less sales tax revenue compared to an average year. The Kansas Department of Revenue keeps monthly sales tax records that include comparison statistics to the same month last year. This chart shows the difference in state sales tax collections from 2019-2020 in Kansas City metro counties. It shows that the less populous counties on the Kansas side — Leavenworth and Wyandotte — often exceeded state sales tax collections over last year, implying more taxable sales. The more populous counties, however, experienced a steeper drop in collections, particularly in March, April and May. The aggregated Kansas-side of the Kansas City region is also shown, and mirrors the populous counties.
Kansas-side counties experience more varied local sales tax disbursements
KDOR also keeps monthly records of local sales tax disbursements. These records show a different pattern than the state sales tax collection records do; counties do not appear to experience social distancing-era sales tax loss compared to 2019 until May of 2020. While less populous Leavenworth and Miami counties again see many months with gain over 2019, Johnson and Miami counties see some gains as well, and their lows are not as low compared to state sales tax collections.
Other factors in retail
Kohl's, Independence, Missouri
There are many angles from which to analyze the retail industry. The majority of this report focused on research questions for which data was readily available to Mid-America Regional Council at both the national and regional levels. However, other views arose that would be interesting to study if data were available for comparison. These issues could be helpful for city planners, managers and local elected officials to think about as they discuss retail.
Loss of middle-tier retail
The rise of supercenters and warehouse clubs and the corresponding decline of department stores coincides with another trend that professional services firm Deloitte found in its own research. In a report called The Great Retail Bifurcation , Deloitte found that, nationally, "price-based" retailers (those that "deliver value by selling at the lowest possible prices") and "premier" retailers (those that "deliver value via premier or highly differentiated offerings") were growing in revenue and net store openings. In contrast, "balanced offering" retailers (those that "deliver value through a combination of price and promotion, and many [of those] offer widely available products or experiences") saw very little revenue growth and suffered net store closings in the five years before the study was published in 2018. Deloitte's report sees the shift in retail as related to changes in consumer income and expenses — specifically, that income growth has mostly occurred among those with an income of over $100,000, and nondiscretionary spending has increased for those making less.
Viewed from another angle, Pew Research has tracked the nation's share of adults in the lower, middle and upper classes. Its research shows that the middle class has shrunk to just over half of the population, while both the lower and upper classes have grown. This too could support the view that changing incomes are driving changes in retailer orientation towards "price-based" and "premier."
Retail debt load
A Bloomberg article from Nov. 8, 2017, cited debt load as a factor that could hurt the retail industry more than online sales or shifting generational preferences. Reminding the reader of the example of Toys "R" Us, which went bankrupt because it could not pay its debts despite its profitability, the article says that large amounts of retail debt is coming due, and lenders may not be willing to refinance it. Since retailers are the employers of many low- and middle-income people, increased closings could affect them.
Of interest to the Kansas City region is a map in the article showing the percentage of retail real estate loans that are delinquent. The Kansas City metropolitan area fell into the worst tier of the map's data, showing that between 25% and 53% of its retail real estate loans were delinquent as of September 2017.
Notes on the data
JobsEQ is a Software-as-a-Service application provided by Chmura, a labor market data and analysis firm. For industry data used in this report, JobsEQ's data dictionary states: "Employment and wages data are derived from the Quarterly Census of Employment and Wages , provided by the Bureau of Labor Statistics and imputed by Chmura where necessary. Data are updated through 2019Q4 with preliminary estimates by Chmura updated to 2020Q2. Establishment counts are per the QCEW updated through 2019Q4." Establishments data is for "covered" establishments only ("covered" relates to unemployment insurance). Employment data represents "total employment," which includes "covered employment, self-employment, non-covered railroad employment, and non-covered religious organizations employment" per Jobs EQ.
Pull factors were calculated by dividing the taxable sales per capita of a county with the taxable sales per capita of the Kansas City region. Data comes from the Missouri Department of Revenue (MoDOR), the Kansas Department of Revenue (KDOR), the American Community Survey 5-year estimates. MoDOR provides taxable sales numbers directly, but Kansas taxable sales numbers needed calculation for several years. Historical Kansas state sales tax rates used in the calculations were found at Voice for Liberty (wichitaliberty.org).
