Retail in 2017: Continuing Apocalypse or Beginning of Revival?

March 28 2017 | Committees

Retail in 2017:  Continuing Apocalypse or Beginning of Revival?


Written by: Christopher Caplinger & Erin Rosenberg


                The headlines of yet another national retailer closing stores and/or filing bankruptcy seem to come almost daily. The stories beneath those headlines frequently offer various reasons for the larger themes of teen-apparel retailer troubles or big-box store closings, including changing buying patterns either of young people generally or possibly as a lingering effect of the Great Recession. Of course, like many other things, the causes of these retail troubles are numerous and complicated. Likewise, the potential solutions for or methods and approaches to dealing with the attendant layoffs of employees and impact on mall traffic are equally myriad and complex. The sheer volume of data associated with the headlines and the impacts on both the macro and micro levels are so cacophonous they seem to defy understanding.

                However, some insight can be had by separating retailers into similar groups. Although the problems of big-box store and anchor retailers may overlap, they are not the quite the same problems encountered by smaller teen and other apparel retailers. HHGregg, J.C. Penney, K-Mart, Kohl’s Macy’s, Office Depot, Pier 1 Imports, Sears, and Staples collectively have announced the closure of many hundreds of stores. Those closures could cause the vacancy of thousands of square feet of retail space in indoor and outdoor (strip) malls across the country, resulting in thousands of layoffs and decreases in foot traffic at smaller retailers near those locations. These closures appear to be disproportionately the result of retail being “overstored,” whereby the flat or slight declines in retail sales at these retailers have resulted in a need to consolidate or relocate store locations. As evidence, one could point to the fact that Target is also closing stores, but is opening smaller stores in certain urban centers. The causes of flat or declining sales are, of course, somewhat unknown, but since wage growth since the Great Recession has been largely flat, common sense would suggest that retail expenditures are therefore competing with bigger-ticket items like rent, mortgages, car notes, and health care costs for a part of disposal-income pie that hasn’t expanded much in the last decade. And although online sales have certainly had an impact on retailers generally, it should be noted that as of 2015 approximately 90% of all retail sales – totaling more than $4 trillion dollars – were still taking place in brick and mortar stores.[1]

                Smaller teen and other apparel retailers including Abercrombie & Fitch, Aéropostale, American Apparel, BCBMaxAzaria, Crocs, Deb Shops, Delia’s, Foot Locker, and Wet Seal have collectively announced the closure of well over one thousand stores. The problems with these retailers seems to be more related to their customer base than to other factors. Specifically, some of these retailers seem to have target demographics that no longer find their products appealing. However, other apparel retailers, including T.J. Maxx, Burlington Coat Factory, and Ross, are actually expanding, which might indicate that more frequently changing inventory and consistently low prices are a way to maintain and even gain market share.

                Of course, there are other retailers experiencing difficulties that appear to be potentially sui generis. Family Christian Stores and CVS Health are closing collectively more than 300 stores, but the causes of those closures are clearly not the same. Some of the reporting seems to indicate that Family Christian Stores may have finally succumbed to the online sales issues that impacted other national booksellers like Borders and Waldenbooks. Meanwhile CVS Health’s closure of stores seems to be both a cost-saving measure perhaps related to the same “overstored” problem referenced above as well as uncertainty surrounding the impact of the potential repeal of the Affordable Care Act. These last two examples demonstrate that there are always exceptions and that generalizations and trend-spotting can be helpful but do not provide complete information. Thus, 2017 will no doubt be full of change, but observers should be cautious and not declare either the end-of-days or the rebirth of the retail industry . . . at least not yet.


[1] International Council of Shopping Centers, ISCS OAC Summit, Industry Update, presented by Liz Holland, ICSC Chairman on March 2, 2017.

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