PCC to close its downtown Seattle store due to poor sales

Less than two years after opening a flagship store in downtown Seattle, PCC Community Markets announced Wednesday it will close the financially struggling location Jan. 31.

“Despite an amazing team, fantastic store conditions, and a supportive landlord, our Downtown store has unfortunately remained unprofitable, and we do not see that changing for the foreseeable future,” CEO Krish Srinivasan said in a statement.

“Since continued losses pose a significant financial risk to our co-op’s long-term viability, we are acting now,” Srinivasan said of the store, which is on the ground floor of the Rainier Tower at Fourth Avenue and Union Street.

The downtown store has nearly 80 employees. PCC said it “will prioritize their placement in other roles within the co-op by offering staff positions at other stores.” 

The announcement comes 5 ½ months after PCC reported losing $250,000 in 2022, the first loss since the 1990s, and said around a third of the red ink was due to the downtown store. 

Downtown residents and boosters had championed the new store, which opened Jan. 20, 2022, as a welcome sign of recovery for a downtown that had struggled to bounce back from the pandemic. 

The grand opening drew a huge crowd, including many downtown residents excited about a full-service grocery in a neighborhood that was in danger of becoming a grocery desert due to recent closures.

Instead, the 20,000-square-foot grocery store demonstrated just how far the downtown remains from a recovery.

With remote work still reducing the number of workers downtown and with fewer than expected downtown residents, the PCC was never able to generate the kind of foot traffic or sales necessary to turn a profit, co-op officials said.  

“Based on these dramatically changed shopper demographics and habits, PCC sees no viable path to operating a profitable full-service grocery store at this location,” the co-op said in Wednesday’s statement. 

The news was greeted with a mixture of shock and resignation by customers.

“I can understand why — I see very few people there,” said Jean Henderson, a downtown resident of nearly 40 years who had attended the grand opening.

“I’m super sad,” added Rufo Calvo, who works just down the block and shops at the PCC nearly every day. “Around here, we don’t have a grocery store, technically, now.”

Indeed, with PCC closing, downtown residents in search of a full-service grocery will need to go nearly a mile north, to the Whole Foods on Westlake. The only other full-service grocery, the Kress IGA at Third Avenue and Pike Street, closed in 2020, which its owners blamed on crime in the area. Target and H Mart, both on Second Avenue, also offer groceries, as does the Uwajimaya, on Fifth Avenue South.

Jon Scholes, president and CEO of the Downtown Seattle Association, called Wednesday’s announcement “unfortunate news for downtown residents, workers and visitors,” in a statement. “They’ve been a valued business downtown since opening.”

When PCC leased the space in 2018, then-CEO Cate Hardy hoped to capitalize on a growing downtown population of office workers and residents, as well as the neighborhood’s lack of grocery options.

Hardy also felt “a flagship location in an iconic building in the middle of downtown Seattle” would help PCC stand out in an increasingly competitive grocery marketplace,” as she told the Puget Sound Business Journal.

But the store faced a series of setbacks. Amazon, which had planned to occupy Rainier Tower, and provide a huge supply of office workers, changed its mind in early 2019.

A year later, COVID-19 all but emptied downtown of office workers, causing hardship for downtown retailers.

PCC postponed opening the downtown store, from 2021 to 2022, in the hopes that the recovery would be further along. But only around a third of the city’s office workers were back by January 2022, compared to pre-pandemic numbers, according to cellphone data posted by DSA.

Although that has improved since, downtown workers are still at around 50% of their pre-pandemic levels, with the biggest numbers midweek. According to PCC employees, that translates into busy lunch hours Tuesday through Thursday and almost nothing on the weekends.

PCC’s decision to close the downtown location appears to represent a recent pivot. In May, Srinivasan said PCC had no plans to leave downtown. “We’re not going to cut and run at the first sign of trouble,” according to an interview with The Seattle Times at the time. 

But that view changed as PCC has faced broader financial struggles due to the lower-than-expected sales, inflation and the expense of a large retail operation that has expanded rapidly in recent years. 

Since 2015, the co-op has opened seven new locations — in Columbia City, Bothell, Burien, Ballard, Bellevue, the Central District and downtown Seattle — and plans another, its 17th, in Madison Valley.

That helped PCC increase revenues, but it also came with an even faster increase in costs — notably, occupancy costs, which include leases and store-opening expenses. Since 2018, occupancy costs have risen roughly twice as fast as revenue, according to the co-op’s published annual reports. 

The downtown location also has extra expenses from additional security, Srinivasan said.

“In looking ahead to 2024, the co-op is focused on restoring and securing its long-term financial viability,” the co-op said Wednesday. “The closure of the Downtown store is an important and necessary step in that journey.”

It will also be a painful step. Although PCC declined to share the costs of opening the downtown store, a spokesperson said PCC’s “average investment” to open a new store is $10 million.

The co-op acknowledged it will continue to have “rent obligations” for the downtown store but didn’t disclose the amount or length of those obligations.

And even with the closure, PCC says it expects 2023 to generate disappointing results.

News of the closure spurred concerns over downtown security.

“This is a sobering reminder that City officials must do everything we can to ensure that conditions within our purview contribute to a thriving business climate, starting with public safety,” said Seattle City Councilmember Sara Nelson in a statement issued within minutes of news of the closure hitting the internet.

But the DSA’s Scholes argued that despite the closure, downtown Seattle is showing steady signs of recovery, “with increasing foot traffic, a record residential population and more store openings than closings.”

The closure decision comes as PCC is bargaining with its union, United Food & Commercial Workers Local 3000, over a new three-year contract for its nearly 1,600 hourly employees.

UFCW has recommended members vote no next week on PCC’s latest proposal, and the timing of the closure may be seen by some rank and file as an attempt to sway the vote, given that PCC said last week that the union’s latest wage proposal “would make the co-op’s existence unviable.”

But other employees say the co-op had little choice.

“Everybody worked their tails off,” said James Mykland, a downtown PCC employee.

Given the store’s poor performance and the broader challenges that all grocery retailers have been facing, on everything from inflation to high labor turnover, the downtown location “wasn’t sustainable,” Mykland said.

“I have to give them credit for making this decision,” he added.