That Retail Apocalypse

The End of Physical Retail

Brick-and-mortar stores keep closing down as retail stocks slump

Michael K. Spencer in FutureSin

Jul 14 · 5 min read

I’ve been writing about the retail industry for at least four years. Many people who work in retail would tell me the retail apocalypse was a myth.

Well, in 2019, the figures are out and it’s not looking great for American brick-and-mortar retail as we know it.

According to CNBC, store closures are actually accelerating and may top 12,000 in 2019. Remember, this is when the economy is actually at the tail end of the longest economic cycle in recent memory. How many will close during the next recession, forecasted for probably 2020?

Luxury retailer Barneys New York is making preparations for a bankruptcy filing that could come as soon as this month, and it’s not alone.

Six months into 2019, there have already been 20% more store closings announced than in all of 2018, according to a new report from global marketing research firm Coresight Research.

Department stores are also battling to balance waning sales and costly store-base. Higher rents and increasing E-commerce consumer behavior means tough times are ahead for physical stores. For example, Amazon Prime Day event is now 2 days. The 11.11 Single’s Day is predictably eleven days in some parts of Asia.

Will physical stores even be able to compete in the future?

• So far, 7,062 store closures have been announced by U.S. retailers this year, according to a tracking done by Coresight Research. And the tally could top 12,000 by the end of 2019, setting a new record, Coresight says.
• Last year, Coresight tracked 5,524 store closures, down more than 30% from an all-time high of 8,139 closures announced in 2017.
• Still, in 3 years that will be over 25,000 store closures. That isn’t nothing.

Stores Closures are 4x Stores Openings

Amid all the closings, there are still retailers opening stores. Coresight has tracked 3,017 store opening announcements so far this year. Notice anything about this? About 4x as many stores are closing as opening = the future of retail.

The XRT, which tracks the biggest names in retail, is coming off its worst month in more than a decade after falling roughly 13% in May. Retail is also an indicator of consumer sentiment and that foreshadows risk factors to the economy.

This past Thursday, Lululemon opened its biggest store ever in Chicago. Not so great days for brands such as Barneys, Charming Charlie, Fred’s, Bed Bath & Beyond and dozens of others. Retail was always hyper-competitive, but we seem to be reaching an inflection point.

The future of retail is bright, but that may increasingly favor big retail who are able to do speedy delivery and offer convenience that SMB retailers and especially brick-and-mortar retailers cannot compete with moving forwards into the 2020s.

The Future of Retail is Automation

The future of commerce and the marketplace are being seen in places like China where there are super apps, mini-programs, and more sophisticated online to offline in-app services. America and parts of Europe are still bloated in favor of legacy retail with too much physical space and not enough omnichannel convenience and mobile personalization.

This will mean that the retail apocalypse is only getting started.

America isn’t the new world for the future of retail. It’s the old world, and bankrupt malls and dying Mom and Pop stores aren’t at all surprising in this context.

I never heard of Dressbarn and Topshop or many of these retail brands that are in trouble. We know Amazon is having a massive effect on the retail landscape of the U.S. Black Friday is dead. Long live cyber shopping week. Amazon Prime Day moving to a 48-hour event is a sign of things to come. Other retailers are struggling to match those prices and speedy deliveries.

Walmart Has Failed to Follow Amazon into E-commerce

Walmart has shown it’s been unable to follow Amazon into E-commerce in any significant way in spite of throwing $Billions at the problem and a major acquisition.

Walmart is losing $1 Billion in this effort among other problems it has. If Walmart can’t do E-commerce right, that means most retail stores won’t be able to either. Walmart has a nearly unlimited budget and consumer advantage. It’s the biggest physical retailer in the world.

Frustrations are growing within the company (Walmart) as losses mount. So you want to be like Amazon? Bonobos, Modcloth and plus-sized fashion brand Eloquii — which it bought last year — are still unprofitable. How to kill a retail brand? Acquire it and burry it within your one-size-fits-all service.

Physical stores are some of the least adaptable folk in the world because they don’t have the talent to keep up. Legacy retail will be disrupted, and each decade will reflect that. Even in the real world, that takes time.

Retail Optimization and Automation Will Continue

In 2017 we had Payless closings, the entire HHGregg electronics and appliance chain, and hundreds of Sears and Kmart stores. Every year there will be more victims, even as consumers change their habits.

Even CVS is closing 46 of its “underperforming” locations across the country this year. That’s still less than 1% of CVS’ roughly 9,600 stores nationwide. Retail is a constant juggling act of optimization in a cruel world where the marketplace is king. Many physical stores don’t have a chance of surviving the next decade.

The pain is expected to continue into future years, according to an April report from UBS Securities. UBS analysts said 75,000 more stores would need to be shuttered by 2026 if e-commerce penetration rises to 25% from its current level of 16%.

Of course, retail analysts don’t want to read the signs or red flags. Their jobs will be in jeopardy. Retail will be significantly automated with robotic delivery and cashier-less stores too, we won’t need a salesperson in the future to shop. AmazonGo stores and LiDAR tech is coming.

The end of what we once called retail is of course not the end of shopping. We’re programmed to love things and consume at all costs, but the way we do so is also changing. Brands like Microsoft who develop tech for retailers can profit in the transition.

I expect 2nd quarter earnings to be quite dismal. That is, analysis by UBS said tariffs on Chinese imports could put $40 billion of sales and 12,000 stores at risk. The trade war looms large for the future of the economy and a retail slump might be the signal that all is not well after all with the economy in the 2nd half of 2019.

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