SD small towns hit hard by department store closures
The pending closure of Shopko department stores may have devastating effects on six South Dakota small towns that will suffer job losses, decreased access to basic necessities and sales-tax reductions that could limit municipal services.
The announcement that the retail chain will close several stores has stunned city and chamber of commerce officials in Dell Rapids, Redfield, Wagner and Webster who say their economies and residents will suffer from the closures. That number was driven up with the announcement Thursday that the Chamberlain and Custer stores will close in April. They say shoppers will soon have to drive up to an hour each way to buy home and living products, and they worry that opportunities for future growth of their towns could be hampered.
The Wisconsin-based retail chain said in December that as part of a restructuring strategy it will close more than three dozen Shopko stores across the Midwest. The closures in South Dakota will take place in four towns under 4,000 in population that do not have another department store. Three of the towns are geographically isolated.
Analysts say the closures are being driven by the increased ease of online shopping and the growth of mega-stores like Walmart that combine a traditional department store with a full grocery. Furthermore, some experts say the explosive growth of discounters like Dollar Tree and Dollar General — both of which operate in the South Dakota towns losing their Shopkos—have squeezed mid-sized retailers that cannot compete on price.
Officials from Shopko did not respond to several phone and email messages from South Dakota News Watch. But in previous press statements, the chain that has 363 stores in 24 states said it chose locations for closure based on a review of "the long-term outlook on profitability, sales trends, and potential growth."
In isolated rural areas of South Dakota, the pending closure of the Shopko stores — all of which opened within the past four years — has exposed the fragility of small-town economies. The store closures are taking both an economic and emotional toll on residents, business owners and those who work to ensure a vibrant future for their communities.
"I was born and raised here and I have a passion about my community and small towns in general," said Kelsey Doom, Director of Economic Development for Wagner Area Growth. "But I'm starting to wonder, 'How are we going to make it as a small town?'"
Major 'trickle-down' effect expected
The shifting nature of retail has led to store closings and financial concerns in both urban and rural areas of the country. Sioux Falls and Rapid City have been hit by the downfall of Sears, Herbergers and K-Mart, which is about to close its last South Dakota location in Rapid City.
Consumers in larger cities are protected by the diversity and depth of remaining retail offerings. In the four East River towns losing a Shopko, the closures are causing concern on several levels. Each closure will cost about 15 to 25 people their jobs in communities where skilled labor positions are plentiful but decent-paying retail positions are hard to come by.
The towns will each lose their only major retail outlet and access to the wide variety of clothing, toys, small appliances, food and other home goods typically sold by Shopko. Though all four communities are home to dollar stores, residents in Redfield, Wagner and Webster will have to drive roughly an hour and those in Dell Rapids about 20 minutes to shop at a comparable retail outlet. The lack of access to retail goods may cause a hardship for some populations, particularly lower-income and elderly residents.
The closures, officials say, could also inhibit future growth by limiting retail options that entice new residents and businesses that are critical to long-term economic stability in small towns. Having a large building sitting vacant at the entry point to their downtowns won't help encourage growth, either.
While overall the economy has been strong in Webster, a town of about 1,900 along U.S. Highway 12 in Day County, losing a prominent, highly visible retail outlet is a significant setback.
"With our businesses, it all adds up to a well-rounded community, which attracts people to come here for a job, to move here or for an industry to locate here because the more you have, the better off you are," said Webster Mayor Mike Grosek. "It gives you an uneasy feeling, and it's a big downer when a corporation comes down and just says, 'Thanks for everything, but see you later.'"
The towns losing their stores also will see the evaporation of a sizable chunk of sales tax revenue that could affect municipal operations ranging from police and fire protection to upkeep of streets and parks.
"In all these small communities, we live and die on the sales tax," said Justin Weiland, city administrator of Dell Rapids in northern Minnehaha County. "You strip away some of that sales tax and you strip away the ability to pay for your police department or your park system or the street projects you planned for next year."
Towns worked hard to land Shopko stores
Officials and residents of Dell Rapids were surprised and disappointed that Shopko had targeted the store in their community for closure.
The Shopko opened in a flourishing business plaza about 2.5 years ago on the northwest side of the city, said Weiland.
Sales at the store likely were hampered by an invasive 3-year road project that tore up Highway 115 in front of the store and between Dell Rapids and Interstate 29, Weiland said.
The Shopko closure and the road construction project highlight the fragility of small-town economies across South Dakota and the country.
"It was a three-year project that really disrupted the traffic pattern in the region," Weiland said. "All of our retailers on that corridor, the entrance to Dell Rapids, said the traffic problems really affected them."
A down year for agriculture or another major industry can also hurt a local economy. With ongoing trade wars and losses due to tariffs, heavy rains that made harvesting difficult and low commodity prices, many rural South Dakota small towns took a hit in 2018.
Local officials and business leaders fear the Shopko closures will have a significant economic ripple effect as patrons who now must leave town for clothes and other basic goods are likely to do more shopping in larger cities nearby.
In Wagner, a reservation town of about 1,600 people in Charles Mix County, losing Shopko is likely to entice even more people to make the hour drive to Mitchell or Yankton to shop for basic necessities and more, said Doom.
"It's going to be a huge trickle-down effect," said Doom, who also heads the Wagner Chamber of Commerce. "When they're at Walmart in Mitchell or Yankton, they're going to grab all their groceries and have dinner and spend money that they're not going to spend locally."
The towns where Shopko is closing are also losing out on investments made to lure the stores to locate there.
In Wagner, Doom said she worked with a local landlord to get Shopko a favorable lease on an existing building. The city also entered into a deal to give Shopko a sales tax rebate of up to $25,000 a year for five years, which saved the company about $70,000 in sales taxes over the past three years, Doom said.
Doom said she is pitching an idea to possibly divide up the 22,000 square-foot Shopko building and turn it into an event hall, multi-use retail plaza or hub for offices. Doom said she would love to attract a family-oriented enterprise such as a laser tag facility to the site.
In Webster, the city and local economic development group ponied up $50,000 in incentives to upgrade the building Shopko inhabited, and in Dell Rapids a land swap between a private landowner and the local development corporation helped that city attract a Shopko.