A few days ago, I wrote a little post about Saks (NYSE: SKS) and Neiman Marcus, in which I suggested that stores that focus on high-end luxury items were likely to be the first victims in a recession. The reasoning for this is simple: when consumers have less money to spend, they are unlikely to waste it on expensive prestige purchases. As Sharper Image sorts out the details of its closure, and luxury retailers try to figure out how to deal with the evaporation of their consumer base, small stores are starting to experience major problems.

On February 16, Wilson's Leather announced that it intends to close 160 of its 260 mall stores. Having worked at Wilson's for a brief period in the early 1990's, I can attest that this is definitely not the first time that the retailer has had problems; in fact, store closings are practically a stock-in-trade for the company. However, Wilson's is merely highlighting what many analysts believe is going to become a trend among American businesses: the closure of small retailers.

Wilson's, of course, has always been particularly vulnerable. As a specialty leather retailer, they only sell one type of item, and the popularity of that item is closely tied to the seasons. With the exception of motorcyclists and fetishists, most people aren't particularly interested in buying a leather jacket in July. Moreover, Wilson's stock is specifically targeted to middle-income consumers: sturdily constructed and priced at a discount, Wilson's jackets are also somewhat boxy and not particularly sleek. Unfortunately, middle-income consumers are among those most directly affected by the rising costs of gas, food, and consumer products.

While Wilson's might be among the first companies to feel the crunch of the recession (or, if you prefer, "reduced consumer confidence and, incidentally, reduced spending"), it will probably not be the last. Specialty stores and boutiques are probably looking at a tough year. "Mall" stores like Ann Taylor (NYSE: ANN), American Eagle (NYSE: AEO), Sephora, The Gap (NYSE: GPS), and PacSun (NASDAQ: PSUN) tend to pay premium prices for their spaces, have a rather limited range of stock, and charge more money for their products. All of this adds up to a vulnerable position when it comes to reduced consumer spending. Add in the fact that, ever since the late 1990's, malls have been declining as centers of commerce, and you've got a recipe for disaster. In fact, some analysts are predicting that retail bankruptcies this year could reach the highest level since 1991.

As for the next domino, if the current trends in mall shopping and small business problems continue, I'd watch out for a major downturn among Mall property management companies.