Alan Treadgold, retail expert at PA Consulting, discusses US retail store closures with MultichannelMerchant’s Daniela Forte.
The article notes that the ongoing drumbeat of retailers either closing stores or filing for bankruptcy is evidence of the ongoing seismic shift in customer demands and expectations, and the failure of many to pivot fast enough to meet them.
Even with all this bad news, many companies have managed to get the memo and stay ahead of the curve, and roughly 88% of all retail spending is still going through a physical till. But the pain caused by the closures is undeniable on a number of levels.
Alan says: “For many, shopping is now ‘digital first, stores maybe,’ so it’s much less going to the mall and much more going online. At a local level, the impacts are felt very sharply. A lot of those store closures are of retailers that are big anchor tenants in malls and outlet centers. When they leave, the viability of the entire mall can go with them.”
In 2018 alone, major store closings took place at Destination Maternity, Macy’s, J.C. Penney, and The Bon-Ton Stores, among many others. One of the biggest blows came as Toys R Us announced it was closing all of its 800 stores after filing for bankruptcy protection in 2017.
While still a strong going concern, Abercrombie & Fitch plans to close 40 more stores in the U.S. And Chico’s FAS is shutting down 250 stores over the next three years to reduce costs and improve profitability. Victoria’s Secret plans to close 53 stores this year as more women are shifting towards a growing number of lingerie startups, including some with a plus-size focus, as well as bigger retailers. Payless ShoeSource announced in February it may need to shut down most if not all of its North American stores if it can’t find a buyer. The company filed for bankruptcy protection in 2017, while closing 400 stores in the U.S. and Puerto Rico.
Alan notes that retail icons such as JCPenney, Walmart and Macy’s are under tremendous pressure from not only Amazon but host of startups finding new ways to engage directly with shoppers.
He adds: “Technology-enabled shoppers have access to essentially limitless products online and can effortlessly find the lowest prices too. And of course, even more shoppers are showing that they want to shop this way in more categories.”
Alan continues: “The big retailers, especially ones that are servicing a lot of debt from deals that you probably wouldn’t dream of making now, are in a fight to stay relevant and indeed, to stay in business.”
Alan said discount retailers are under a huge amount of competitive pressure, as they don’t have the almost limitless product range of online competitors and customers don’t value them as they did. “This doesn’t mean that they can’t compete. They have to be very clear about what their competitive advantages are and implement plans to transition to a business model that’s much more relevant to the way their customers now want to shop.”
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