(ANTIMEDIA) In the latest blow to traditional retail sales, this week Toys R’ Us filed for bankruptcy, following in the footsteps of an increasing number of other brick-and-mortar chains. But the giant toy outfitter is not the only company suffering losses, as a recent report from Clark.com, a consumer analysis site details.
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Though separate statistics show that more stores will open in 2017 than will close, the type of stores making gains suggests frugality is the norm U.S. consumers amid a continuously harsh economy.
Clark.com compiled a list of retail stores that announced closures of physical shops this summer. Sears said at the end of August that “in fiscal year 2017, [they] have closed approximately 180 stores previously announced for closure, and an additional 150 stores previously announced for closure are expected to be closed by the end of the third quarter of 2017.” They will also be closing 28 K-Mart locations, citing a desire to change their business model so “the physical store footprint and [their] digital capabilities match the needs and preferences of our members.”
Vitamin World filed for bankruptcy last week and plans to close 51 of 334 stores, which are located mostly in malls; Gap said in a press release earlier this month it will close 200 Gap and Banana Republic stores (and open 270 Old Navy shops); Perfumania filed for bankruptcy in August, moving to close 64 of 226 stores; Starbucks announced at the end of July it will close all of its 379 Teavana shops by next year; Gymboree plans to close roughly 350 stores following its bankruptcy in June; True Religion filed for bankruptcy in July and moved to close 27 stores; the Ascena Retail Group, parent company of Ann Taylor, Lane Bryant, Justice, and other chains, announced in June it would shutter over 250 stores by 2019 (in addition to the 71 it had already closed this year). The group noted they could close up to a total of 667 of their 4,500 various locations.
The summer trend follows even more closures in 2017 — in March, Business Insider noted roughly 3,500 stores would shut down this year. Macy’s revealed plans to shut down 68 locations in January, J.C. Penney announced it would close 138 stores back in March, and Abercrombie and Fitch told investors it planned to close 60 locations, bringing the total closed to 169. Other retailers closing stores are Bebe, Guess, Crocs, Guess, American Apparel (which has filed for bankruptcy twice), RadioShack, Staples, CVS, and Gamestop.
Wet Seal and Limited are closing all or nearly all of their locations this year.
Many blame Amazon and the popularity of online retail, especially amid the general collapse of America’s once prominent shopping malls, and the news media has repeatedly sounded the alarm of the “retail apocalypse.”
But a recent report from the IHL Group, a global retail and hospitality analysis and advisory firm, argues there is no retail apocalypse. Rather, they contend, customer preferences are simply shifting. In “Debunking the Retail Apocalypse,” the analysts point out that more major retailers and restaurants are opening 4,080 more stores than they are closing this year.
Nevertheless, many of the closing stores have been mainstays of American retail culture for decades, and those finding the most success are focused on budget pricing. Stores like the Dollar Tree are making major gains, a trend also reflected in Gap’s decision to close their more expensive stores, including Banana Republic, to focus on Old Navy, which offers a much lower price point.
As the IHL report notes, “According to the Bureau of Labor and Statistics, since 1996, overall inflation in core consumer goods and services has averaged 55% over the 20 year period of 1996-2016.”
Prices on college tuition and textbooks have gone up 200%. Costs have increased for child care (125%) healthcare (120%), food and beverage (65%), and housing (60%). In contrast, products like cell phone services, TVs, toys, and software have become cheaper.
IHL explains that “products and services that are more likely to be considered as necessities have grown significantly in costs over the last 20 years and items that are typically in the luxury category have gone down in price.”
“In a vacuum, these prices don’t tell us much,” they explain. “However, when compared with income growth over the same period we can see that a much higher percentage of consumers cannot keep up with inflation, thus are shopping more at lower cost retailers and less at higher image/brand stores.”
IHL notes that 40% of Americans have not been able to keep up with inflation, and as a result, the higher costs for basic necessities have affected their shopping habits. So has student loan debt, the decline of the middle class, the growth of e-commerce, and the fact that large retailers have prioritized store expansion over customer experience.
Considering the economic situation, it’s unsurprising that the types of businesses opening the most chains are mass merchants — like Target, Wal-Mart and Dollar General — and convenience stores. IHL also notes that 2,026 fast food stores opened this year. Interestingly, more cosmetics stores are opening than closing (cosmetics become more popular when economic times are tough).
Ultimately, IHL notes, retail sales are up $121.5 billion from July 2016. However, Americans are carrying roughly $1 trillion in credit card debt against very little savings. While total retail sales may be growing, those making profits and finding success are doing so amid a climate of overall economic decline. While the “retail apocalypse” may not have come to total fruition, Americans’ financial futures certainly seem to be on the downturn.