Besides bankrupt companies, retailers are axing stores that would have been marginally profitable had Covid-19 not interfered. Here are the largest numbers of store closures announced so far, GNC (1,200 stores), Zara (1,000 stores worldwide), Pier 1 Imports (936), Stage Stores (738), Papyrus (254), AT&T (250) and Victoria’s Secret (250). Since 2007, some 45,000 U.S. stores have closed, a projected 9,257 stores in 2020 alone.
A key retailing parameter, sales per square foot, has fallen precipitously at public retailers from an average of nearly $375 in the early 2000s to around $325 in recent years, reports commercial real estate research firm CoStar, citing U.S. Census, Moody’s Analytics and CoStar Portfolio Strategy data.
The most dour assessment? The New York Times weighing in with this startling headline: “Department Stores, Once Anchors at Malls, Become Millstones.”
Ouch! What’s driving this trend? Three phenomena:
- Digital Lifestyle Ubertrend – The Digital Lifestyle Ubertrend is altering shopping behavior, with the Amazon Factor clearly at play here. Real estate developers count on premium retail brands to anchor shopping malls, but Amazon’s prime membership is siphoning off sales from brick-and-mortar stores. Amazon.com has reportedly signed up some 112 million U.S. Prime members — without a doubt a vast majority of America’s top buyers.
- Time Compression Ubertrend – Not only is it more convenient to shop online; it requires fewer resources. Shoppers save on gas or public transportation and, as BusinessWeek observed in May 2005, “The typical one-hour trip to the mall costs about $30 at the average hourly pay for managers and professionals.” This growing realization is amplified by the Time Compression Ubertrend, which has given everybody a big case of too-busy disorder.
- Own worst enemy – The retail industry’s challenges are partially self-inflicted. Capgemini reported in January that “a third of consumers would rather ‘wash the dishes’ than shop in-store.” While that means that two-thirds are still OK with shopping in brick-and-mortar stores, the question is for how long? USA Today reports that millennials are killing department stores, noting that traditional retail is ill-equipped to address the needs of this generation.
By 2035, as much as 40% of U.S. retail sales, or more than $2 trillion will move through online channels.”
— Michael Tchong
Futurist & Speaker
Another issue is that for years now, retailers and analysts have fixated on the large gap between U.S. retail sales, which were projected to reach $5 trillion in 2016, and “puny” U.S. e-commerce sales of $395 billion (PDF).
The fact is that those 112 million Prime customers constitute the lion share of foot traffic and sales at traditional retailers. Absent frequent buyers, retailers are collapsing, abandoning shopping malls, whose gray, hulking masses are fueling a trend dubbed “grayfields.”
By 2035, as much as 40% of U.S. retail sales, or more than $2 trillion will move through online channels. The chief driving forces behind this trend are AI and industrial robotics, which will optimize how products consumers buy are chosen, warehoused, packed and delivered…the same day.