2019 was not a good year for brick and mortar stores. As of November 1, U.S. stores reached 9,302, a 59 percent increase over 2018, according to Coresight Research. The largest contributor was Payless ShoeSource, which declared bankruptcy and closed all its 2,100 stores.
In “Does Experienced Retail Work?” In my April 2019 article, I quoted Deborah Weinswig, founder and CEO of Coresight, who said she expected the U.S. closures to reach 12,000 by the end of the year.
Empty retail space is plentiful – from suburban malls to central Manhattan. Analysts do not see a slowdown in closures as many stores will remain open during the holidays but will probably close in early 2020.
Coresight also reported that 4,392 stores, mainly in the non-upholstered discount sector (Dollar General, Dollar Tree), opened in 2019. But Family Dollar, which was acquired by Dollar Tree in 2015, closed nearly 400 stores this year.
Many financially troubled chains began the year by shutting down locations that were not performing while trying to find investors or buyers. The weak position of these retail chains prevented them from securing financing, and many have filed for bankruptcy.
Clothing chains that declared bankruptcy in 2019 include Barney's, Charlotte Russe, Dress Barn and Forever 21. The clothing chain Gymboree filed for bankruptcy for the second time and liquidated all 805 stores. Discountkoffiskbutiken Shopko filed for bankruptcy and closed over 371 stores. Fred & # 39; s, a discount chain, filed for bankruptcy in September and closed over 520 stores.
According to CreditRiskMonitor, J. Crew, Neiman Marcus, Pier 1 and J. C. Penney are among retailers who are subject to bankruptcy 2020.
An omnichannel strategy for retail is a necessity these days, and many retailers have struggled to implement a successful one. Online retailers have lower costs, fewer barriers to entry and have proven to be more proficient at utilizing social media.
In a telephone interview, Michael Brown, a consumer and retail practice partner at management consultant A.T. Kearney shared his view that older brands do not have social media DNA; they are not as skilled as online retailers. He said: "The core clothing brands are the most difficult to adapt to the new business model."
Online retailers have lower costs, fewer barriers to entry and have proven to be more proficient at utilizing social media.
When it comes to retailers, Brown says that small online niche retailers can attract the following on social media like Instagram and capture a small portion of the market share from old retailers. "When you have ten of these small players take 1 or 2 percent of the customer base, that's when older retailers are at 20 percent."
He also lacks dealers for not renewing himself. Larger retailers such as Target and Walmart have flexed their muscles in 2019, according to Brown, to achieve a successful uniform sales method and effectively compete against Amazon.
When it comes to digital retailers that are now opening stores – for example, Warby Parker, which now has over 50 retailers – Brown believes they will avoid the mistakes of older retailers. They will open more stores because they need physical presence to scale their businesses. "The cost of customer acquisition online only is too expensive," Brown said.
Many analysts believe that cinemas, medical offices and government offices will fill vacancies. In some areas the churches have taken home. The stores will have a smaller footprint. Some stores are transformed into marketplaces, giving small spaces for different brands, especially directly to consumer goods. Pop-ups will also fill vacancies.
Online retail sales in the US now account for 16 percent of the total. But they are likely to rise to 25 percent by 2026, the investment banking company UBS estimates. According to UBS's "store rationalization" formula, every 1 percent increase in online sales will result in 8,000 to 8,500 brick and mortar closures. It could force up to 75,000 additional stores to close in 2026.
The stores that have the most pressure are clothing stores, as US online clothing sales are expected to grow from 23 percent in 2019 to 36 percent in 2026. UBS recommends that clothing companies close a total of 20,700 retail outlets by 2026 to avoid bankruptcy or other adverse financial consequences.
The industry organization National Retail Federation disputes these forecasts, saying that the math is too simplified and that UBS ignores the popularity of buying online and downloading in-store. Nevertheless, physical stores are in an uncertain situation. More closures are likely to occur.