Retail apocalypse: Number of US stores fell last year for first time since 2009

By RetailFOXBusiness

Toys ‘R’ Us failed to evolve digitally, retail expert says

Toys ‘R’ Us is closing its remaining 740 stores in the U.S. and eliminating an estimated 30,000 jobs. Mary Epner of Mary Epner Retail Analysis discusses the demise of the 70-year-old retailer.

The U.S. retail marketplace place saw a reduction in total active stores in 2017 amid a wave of closures and bankruptcies, marking the first time in nearly a decade that the industry posted a decline, according to BDO’s biannual report.

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Struggling retailers closed more than 6,300 stores last year, according to the advisory firm’s data. The trend was worst among specialty apparel stores and department stores located in shopping malls, where customer foot traffic has declined considerably owing in large part to the rise of e-commerce.

“Specialty apparel retailers are being swarmed by competition, not only from e-commerce, but from discount stores (such as Walmart, Target and dollar stores), and higher-growth affordable fashion retailers (such as H&M and Zara),” the report said. “The waning popularity of malls has also been wreaking havoc on sales.”

Walgreens, The Children’s Place, Sears, Michael Kors and J. Crew are just a few prominent retailers that closed stores as part of what analysts have dubbed the “retail apocalypse.” Traditional retailers have struggled to maintain sales amid competition from digital players like Amazon, rising rent and decreased customer interest.

Spending has shifted from clothes to “big ticket” items like cars and tech gadgets, the report added. Retail bankruptcies hit a six-year high in 2017, with some 50 retailers filing for the protection.

“The waning popularity of malls has also been wreaking havoc on sales,” BDO said. “Older malls that were built in the 1950s-1970s have long relied on department store anchors for foot traffic and to attract other specialty apparel tenants. Declining store traffic has forced many mall operators to close doors and address changing consumer demographics and shopping preferences.”

Toys “R” Us became the first major casualty of the retail decline in 2018. The venerable toy retailer said earlier this month it would close or sell all of its more than 700 U.S.-based stores due to declining sales and massive long-term debt of more than $5 billion.

Store closures could top 12,000 in 2018, according to projections from commercial real estate firm Cushman & Wakefield. BDO, however, noted that grocery and dollar store chains have experienced success despite the challenging sales environment.

“They seem to have tapped into the success formula working for consumers at the moment, marrying the right products with the right place at the right price. One clear message for all retailers: listen to consumers and adapt, or die,” BDO said.

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