With Bankruptcies And Store Closures On The Rise; What’s Really Causing Retail Meltdown In The U.S?
by Umar Farooq
Retailers reportedly are filing for bankruptcy protection at a disturbing rate that’s flirting with recessionary levels. Meanwhile, a steady stream of store closures continues to haunt the battered American retail industry.
“US retail store closures for 2017 are on pace to exceed 2008 when more than 6,000 locations were shuttered. In the first three months of this year 2,880 store closures were announced, compared to 1,153 in the same time period in 2008. If the current pace of retail bloodletting continues total store closures could top 11,000 by the end of the year, an unprecedented number. Along with mounting store closures, retailers eliminated 30,000 jobs in March, with a similar number cut in February, making it the worst two-month period for workers in the retail sector since 2008, when the economy was in the depths of the recession caused by the bursting of the housing bubble and stock market crash.” Niles Niemuth
“2017 will be the year of retail bankruptcies,” Corali Lopez-Castro, a bankruptcy lawyer, told Business Insider. “Retailers are running out of cash, and the dominoes are starting to fall.”
More than 3,500 stores are expected to close over the next several months. Annual retail bankruptcies peaked at a total of 20 in 2008 — a level that the US could reach by September if the current rate of filings continues, according to CNBC.
Malls across the country are struggling to stay open as stores close in droves. But it’s getting increasingly more difficult to find replacements for lost tenants, according to RBC Capital Markets. “Over the last few years, we believe most of the emptied store space has been taken over by expansion of restaurants, entertainment spaces/movie theaters, and health & wellness destinations (hair/nail salons and fitness studios),” analysts wrote. “If store closures continue, we find it harder to imagine there is a solid supply of concepts willing to take over these [locations].”
“A deep recession might explain an extinction-level event for large retailers. But GDP has been growing for eight straight years, gas prices are low, unemployment is under 5 percent, and the last 18 months have been quietly excellent years for wage growth, particularly for middle- and lower-income Americans. So, what the heck is going on? The reality is that overall retail spending continues to grow steadily, if a little meagerly. But several trends—including the rise of e-commerce, the over-supply of malls, and the surprising effects of a restaurant renaissance—have conspired to change the face of American shopping.” theatlantic
In short, the future of retail sector is changing. With advent of mobile shopping and self-driving cars, we are going to witness a transformative change in the retail sector. Self-driving cars have the potential to make shopping space nearly obsolete. Retail companies could use these self-driving cars as mobile stores and streets as the ultimate real estate. But as of now we are just witnessing the demise of traditional shopping malls based retail sector and the saga is going to continue at a much faster pace moving ahead in to 2017.