Retailers need to adapt to changing markets, former CEO says

Retail is not dead, it's just transitioning.

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Despite recent announcements that retailers would be filing for bankruptcy or closing landmark-brick and-motor locations, former Toys 'R' Us CEO Gerald Storch said the idea of the demise of retail is merely “a red herring” during an interview with FOX Business’ Stuart Varney. Storch continued to explain the long-term trend has not shifted away from retail. Consumers are embracing e-commerce at the deficit of brick-and-mortar stores and that it “has nothing to do with a recession.”

On Amazon’s Prime Day, for example, customers purchased more than 175 million items during the course of the event in July.

Consumers moving to online retailers such as Amazon have resulted in the U.S. having “probably two to three times — or even four times — as much retail square footage in terms of brick-and-mortar as" needed, Storch said. Brick-and-mortar retail does have winners such as Walmart, Target, Costco, Dollar General, and TJ Maxx, which offer both value to customers as well as a robust online presence, he said.

But this has been a bad week for some retailers.

Forever 21 announced it would be filing for Chapter 11 bankruptcy as it takes “positive steps to reorganize the business,” FoxBusiness.com reported. Similarly, Macy’s has recently confirmed it will be selling off its landmark location in downtown Seattle in early 2020.

Moody’s has even gone so far as to warn of “blood in the streets” for brick-and-mortar retail should recession strike.

TickerSecurityLastChangeChange %
MMACY'S INC.14.67-0.35-2.33%
WMTWALMART INC.119.86+0.73+0.61%
TGTTARGET CORP.127.65+1.22+0.96%
COSTCOSTCO WHOLESALE CORPORATION300.27-0.30-0.10%
DGDOLLAR GENERAL160.78-0.17-0.11%
TJXTJX59.12-0.20-0.34%

In an effort to address the empty spaces left in malls, mega mall owners are currently looking at investing in failing retailers. Brookfield Property and Simon Property have expressed interest in an ownership stake in Forever 21, according to the New York Post, Keeping the retailer alive could prevent hundreds of empty storefronts from plaguing Brookfield and Simon’s malls.

But Storch urges caution for those property owners. Closures could persist despite their ownership, he said.

“They’re going to own the problem, literally," Storch said. "They are going to own all the stores on top of their real estate, so their problem is simply going to be multiplied.”

Brick-and-mortar retail business will continue to fail if their leaders don't adapt to the changing marketplace, Storch said.

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“There are many people in the retail world in general who have not changed their business models to adapt to today’s reality,” Storch said. And that their death will come “because they are trying to take yesterday’s strategies and use them in today’s world.”