It’s hard to compete against Amazon.
More retailers have decided to close stores while Gymboree has filed for bankruptcy.
Ascena Retail Group has decided to close “between 250 and 650 locations over the next two years.” This group owns Ann Taylor, Lane Bryant, and Justice stores among others.
CEO David Jaffe did not specify which brands the closures will affect. But he guaranteed that 250 stores will close. 400 others will definitely close “unless the company can negotiate lower rents at these locations.”
From CNN Money:
He said that the move is necessary to help the company traverse the deeply troubled brick-and-mortar retail market. Jaffe said Ascena is facing a “persistent traffic decline” and expects that to remain a “major headwind” for the company.
Ascena is far from the only company feeling the pressure. Stores that were once staples of American malls are failing rapidly, largely because of increasing competition from digital retailers like Amazon (AMZN, Tech30).
Gymboree, a children’s clothing store, filed for Chapter 11 bankruptcy protection. The company hopes to stay in business, but will close down 375 to 450 stores. It has 1,281 stores total with 11,000 employees.
From USA Today:
The bankruptcy was widely expected after Gymboree refused to pay certain bills in recent months, placing the retailer on a collision course with creditors. The retailer said it hopes to slash $1 billion of its $1.4 billion in debt and to win approval for its plan by Sept. 24.
“We expect to move through this process quickly and emerge as a stronger organization that is better positioned in today’s evolving retail landscape, with the right size store footprint and greater financial flexibility to invest in Gymboree’s long-term growth,” Gymboree CEO Daniel Griesemer said in a statement.
Companies have tried to fight against Amazon and others with its own websites. But online shopping on Gymboree’s website has also gone down. Chief Restructuring Officer James Mesterham said that the company’s “web systems are ‘dated and unsupported.'”
Mall traffic has definitely gone down. When I pitched this article to Professor Jacobsen sent me this quote:
We were at the major high-end mall in RI on Sunday afternoon, normally a busy time. It was a ghost town. Lots of empty storefronts. Quite depressing. Even the high end stores like Nordstrom seemed to be low on inventory, they stretched out the merchandise on shelves to make it appear they had more than they really did.
Back in April I blogged about how all these closures could set a record for 2017. Fourteen chains alone have filed for bankruptcy in the first three months of this year.
Despite the presence of online shopping, 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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