America has too many retail stores
It’s not a new story. Retail sales are up, but operators continue to shutter large numbers of stores as more consumers go online to buy goods and ill-managed and/or debt-burdened businesses fail to overcome the hurdles in front of them.
A new report by Coresight Research said mass store closings are in the offing again this year, following 2018 when 5,524 turned off their lights and 2017 when 8,139 closed. So far in 2019, retailers have announced 2,187 store closures, Ascena Retail, Charlotte Russe, Gymboree and J.C. Penney locations among them.
Retailers have closed stores in recent years despite a strong sales environment for the industry overall. Last year, according to the National Retail Federation, retail industry sales were up 4.6 percent. This year, the group is expecting growth between 3.8 percent and 4.4 percent. As Coresight’s report points out, sales growth for retail is outpacing U.S. gross domestic product as a whole.
While store closings may not be a positive for employees put out of a job, having a weak business fail can open room for stronger ones to move in.
“With any vacant department store, an owner has the opportunity to increase their rent, to reinvigorate or reinvent the space,” Brandon Famous, senior managing director at CBRE, told CNBC. “In many cases a landlord looks forward to the opportunity of getting that space back. In many cases it will be a positive thing.”
Shopping center landlords have turned to consumer-direct brands, pop-ups, food courts and non-traditional tenants, such as shared work space services, to reinvigorate vacant spaces. Some mall operators have even repurposed entire facilities to serve as online fulfillment centers.
While department stores and some specialty operators struggle, discount and dollar store operators continue to add locations. Retailers, according to Coresight, have announced 1,411 new store openings, offsetting almost two-thirds of those being shuttered.
- US Store Closures 2019 Outlook: No Light at the End of the Tunnel – Coresight Research
- Another wave of retail store closures coming. ‘No light at the end of the tunnel’ – CNBC
- Are malls better off as fulfillment centers? – RetailWire
- Are new brick and mortar solutions the key to digital brand growth? – RetailWire
- Why do landlords say they’re happy that Sears is shuttering stores? – RetailWire
- Will foodie culture save the mall? – RetailWire
DISCUSSION QUESTIONS: Are there too many store locations in the U.S., or are retailers dealing with a more nuanced problem? Do you see better ways for landlords and retailers to align store counts/locations with demand?