Now I'm not an economist or banker and I won't pretend to be. I do know however that the economy for premium products is at dismal levels and has been for months. If you're a premium retailer, you're likely bleeding ink. Anyone seen a Jos. a. Bank ad lately? Do you think they want to sell some merchandise?! Premium retailers, most of whom are local and family owned businesses around the country are being systematically eliminated as they die slow and painful deaths. Big-box retailers are doing well on the other hand. Look at Men's Warehouse as opposed to any local men's shoe or clothing store. Van Hoek's in downtown GR had to cut in half it's retail space a few years back. It's survival is in doubt in my mind.
If you've grown up in West Michigan you know the big furniture names. You also know the local retailers. They've been around for a combined 171 years. Both Isreal's Designs for Living and Klingman's have long had an amazing catalog of very high quality furniture products that you simply could not get at the big-box stores. A lot of this furniture was locally made, or at least made in the United States. In the past decade, both companies struggled. They then combined several years back in order to strengthen financially. Klingman's moved from it's old location at the Woodland Mall to the empty Roger's Dept. Store (that's another sad economics story of premium retailers) further West on 28th Street. They made a wonderful renovation of the building from it's 1960's appearance to a glassy, modern showcase store.
Well this weekend we learned that those 171 combined years of history in the quality furniture industry are dissapearing. Fifth Third Bank called-in it's loan and has taken over the local furniture retailer. They will be liquidating all assets in an effort to get what they can in cash value. Robert Isreals, the owner, has stated his sickened reaction to the news, "It's heartbreaking for me; this is totally heartbreaking." he told the Grand Rapids Press.
People from all over the region come to both stores to find quality products they simply can't get at a big-box national retailer. The day the GR Press was there, there were people from metro Detroit shopping the selection, as they knew of the store's legendary quality. Soon there will really only be one choice left in Michigan. Art Van.
Now Art Van is an in-state product thank God, but it is a regionally-large big-box retailer who's quality certainly dips below that of Isreal's and Klingman's. The feeling that you are buying something locally made, from a local family that has been an insitution for so long is a feeling that is simply so difficult to replace these days in this country. We are now a world of Wal Mart's and IKEA, conglomerants with no face, no identity, no personality. You're certainly not buying local from them. The demands of the public have in large-part forced this change. People have been drawn to cheap, disposable products. Look at it just like the low-cost air-carrier phenomenom in a sense. Things change, and sadly the quality niches that we always think will be there and love (that we occassionally use) suffer and dissapear.
Now on to Fifth Third Bank and it's history in the West Michigan landscape. 5/3 Took a LOT of heat when it took over locally owned Old Kent Bank around a decade or so ago. Scores of Old Kent employees were laid off while the ex-owner and CEO made off with millions in a buy-out. Many people locally switched allegiances based on this fact and there still is a sense of resentment over 5/3. Now with this news, some people are raising cane over what they see is a rash and heartless decision on behalf of the bank, which is no longer locally owned. Instead of working to re-structure debt, they want to cash-in liquid assets. "...Banks want to get cash liquid and they certainly don't want retail in their portfolio," said Isreal's of the decision by 5/3 and the economy.
A cold capitalist would simply say "Well, that's economics and business. Everyone knows the rules and what can happen." That is very true and to a point one can not fault that line of thinking. This economy is about survival. On the other hand you have people more set in the tone that due to the local institution's importance to the local landscape and history, the bank should have worked this one out on principle of doing what was right. They see it as a non-local company buying a smaller local bank, laying people off, and now killing the local economy, history and landscape of a town that they have no ties to.
In the end, this will directly eliminate around 150 GR-area jobs at the two stores. On a broader scale this will impact even more jobs, on the side of suppliers and other retailers who benefited from the traffic generated from these stores. This development hurts everyone, especially when it comes to quality and choice. This is a sad, sad reflection of the times we now face not only her in GR, but around the country. Fifth Third would not have been hurt by extending the loan and re-financing.
MLive has a great article from the Press written by Chris Knape. Please take some time to read it! http://www.mlive.com/business/west-michigan/index.ssf/2010/09/robert_israels_heartbroken_ove.html