A financial services company has predicted that 80,000 or more physical stores are expected to close in the United States over the next five years, reducing the total number of American retail stores by about 10 percent.
But what does that mean?
Retail chains may close stores due to a changing market or too many malls and malls.
There were many retail bankruptcies in 2020. The Covid-19 pandemic played a role. But retail has been evolving for years. Just because a dealer is closing a particular location doesn’t always mean their business is failing or that something is wrong with the industry in general.
Here, too, retail could simply change.
“We still have to scratch the surface of the transformation of the retail landscape,” said UBS analyst Michael Lasser in an interview with CNBC on April 6, 2021. UBS and Lasser believe that 80,000 store closures are a base and that the number could be higher.
How will so many store closings affect the industry? For example, what if a lot of physical stores closed over the next five years, but the remaining ones were better? What if the remaining 90 percent embodied omnichannel retail?
Is the number of physical retail locations the best measure of health in the industry? Or could 10 percent fewer deals be helpful if the rest were better?
“After the pandemic, brick and mortar will return, but in a new way that is digital first,” said Raj De Datta, CEO of Bloomreach, a digital experience platform.
Retail E-Commerce ”has been talking about multichannel and omnichannel for the past five years. The idea was that we don’t care how our customers shop, how they work with us, how they come to us. It’s just important to us to deliver a great experience and get them to interact with you [us]… and ultimately, [to] Sell them our products. And while that was a stated goal, it was the furthest from reality, ”said De Datta, speaking at a live event for CommerceCo from Practical Ecommerce.
Instead, retail companies have kept their in-store and e-commerce revenue in separate accounts. They haven’t incorporated leadership teams and haven’t achieved the potential benefits that omnichannel promised.
The pandemic forced changes. During the lockdown, e-commerce boomed and doubled as a percentage of total retail sales, according to De Datta.
There might be fewer brick and mortar stores in the near future, but they could offer a seamless and smooth experience.
Less businesses, more businesses
What if 80,000 retail stores closed over the next five years, but the total number of retailers increased?
“In the past, retail was about selling other people’s products,” said De Datta. The companies “that had a business model of selling other people’s products without a marketplace and their own brands have started struggling with real estate footprints when you can buy the same product from Amazon or other online retailers.”
These companies could represent some of the store closings forecast by UBS. They aren’t the only retail model, however.
De Datta believes we are seeing significant growth in direct-to-consumer brands. Subscriptions to retail products could also increase. In any case, fewer physical stores may not mean fewer businesses. This development could represent a significant opportunity for e-commerce entrepreneurs.
Too much physical memory
What if America has too many brick and mortar retail stores? In a certain state? Or in a specific neighborhood? If this were the case, store closings would be a “right size”.
Take Walmart, for example. The company had sales of $ 559.2 billion for the 2021 fiscal year ended January 31, 2021. This corresponds to an increase of 6.7 percent and $ 35 billion over the previous year.
In fiscal 2020, Walmart’s revenue and operating income increased $ 10 billion and $ 20 billion, respectively. The company grew despite a little fewer branches.
Given Walmart’s gain, the net closings of just 13 locations don’t suggest retail in Armageddon.
For example, in March 2021, Walmart closed its supercenter at 71 Technology Drive in Irvine, California because it was “below par”. This location is only five and a half miles from the Walmart Supercenter in Foothill Ranch, California, just over nine miles from another Irvine Supercenter, and within 15 miles from six Walmart Supercenters.
The Walmart Supercenter at 1326 Bush River Road in Columbia, SC, closed in February 2021 due to its relatively poor financial performance, leaving another 10 Walmarts and Sam’s clubs nearby.