Online shopping wins out.
Online shopping has led to many American retailers to file for bankruptcy at a fast pace, which could possibly set records for 2017. Fourteen chains alone have filed in the first three months of this year.
Turns out no retailer is safe when it comes to shopping online. S&P found that “discount shoe-sellers, outdoor goods shops, and consumer electronics retailers have all found themselves headed for reorganization.” Bloomberg reported:
Meanwhile, America’s retailers are closing stores faster than ever as they try to eliminate a glut of space and shift more business to the web. S&P blamed retailer financial struggles on their inability to adapt to rising pressure from e-commerce.
Urban Outfitters Chief Executive Officer Richard Hayne said as much on a conference call with analysts last month. There are just too many stores, especially those that sell clothing, he said.
“This created a bubble, and like housing, that bubble has now burst,” said Hayne. “We are seeing the results: Doors shuttering and rents retreating. This trend will continue for the foreseeable future and may even accelerate.”
S&P Global Market Intelligence has listed these 10 retailers that could possibly default this year. From Business Insider:
DGSE Companies Inc.
Appliance Recycling Centers of America Inc.
The Bon-Ton Stores Inc.
Bebe Stores Inc.
Destination XL Group Inc.
Perfumania Holdings Inc.
Fenix Parts Inc.
Tailored Brands Inc.
Sears Hometown and Outlet Stores Inc.
Last September, Fitch Ratings listed Sears Holdings, but also named Claire’s Stores Inc. and Nine West Holdings Inc at high risk for bankruptcy. Others at risk included True Religion Apparel Inc., 99 Cents Only Stores LLC, Nebraska Book Co., and Rue21 Inc.
Payless shoe chain filed for bankruptcy this month and will close 400 stores. Before them, HHGregg, Gordmans Stores, and Gander Mountain filed. Radio Shack “filed for Chapter 11 for the second time in two years.”
Sears Holdings has closed many stores, along with Macy’s and J.C. Penney. Others have decided to close stores and amp up their brand on the internet, according to Bloomberg:
Others are trying to re-emerge as e-commerce brands. Kenneth Cole Productions said in November that it would close almost all of its locations. Bebe Stores Inc., a women’s apparel chain, is planning to take a similar step, people familiar with the situation said last month.
“Today, convenience is sitting at home in your underwear on your phone or iPad,” Buss said. “The types of trips you’ll take to the mall and the number of trips you’ll take are going to be different.”
These numbers have led Bloomberg to predict retailers will close over 8,000 stores in 2017:
Closure of stores obviously has an effect on the economy. Bloomberg continued:
The rapid descent of so many retailers has left shopping malls with hundreds of slots to fill, and the pain could be just beginning. More than 10 percent of U.S. retail space, or nearly 1 billion square feet, may need to be closed, converted to other uses or renegotiated for lower rent in coming years, according to data provided to Bloomberg by CoStar Group.
The blight also is taking a toll on jobs. According to Labor Department figures released on Friday, retailers cut around 30,000 positions in March. That was about the same total as in February and marked the worst two-month showing since 2009.
Top rated malls still perform pretty well. Oliver Chen with Cowen & Co discovered that Americans do “prefer physical stores 75 percent of the time.” So how does a company keep the customers?
The key is creating the right experience, whether it’s online or off.
Retailers should “refocus on customers,” Chen said. “Management needs to be fixated on speed of delivery, speed of supply chain, and be able to test read and react to new and emerging trends.”
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