Retailers Seem To Agree With Global Manufacturing

According to Discern Investment Analytics, the number of retail store closings in the first two months of 2016 was about a third more than the closings in the same two months last year. That’s bad news just in terms of the raw increase, but more so given that there was a wave of shutting retailer outlets last year, too. Store closings in 2015 were 29% more than 2014. It’s not a precise estimate of total retailer capacity being drawn down since it doesn’t include absolute square footage or really the sales per square foot in those stores, but it is perhaps more relevant this year since the roster of retailers include some of the biggest like WalMart and Macys.

Last week, Men’s Wearhouse said it will close a whopping 250 stores, while Sports Authority filed for bankruptcy and announced plans to close 140 stores earlier this month.

In February, Kohl’s said it will close 18 underperforming stores. Others such as teen retailer Aeropostale, with more than 900 stores, are teetering on the brink of insolvency…

While most retailers typically trim their ranks at the beginning of a new year — up to 50 percent of store closures happen around now — some industry experts say this year could be the beginning of a big shakeout.

“We are hitting a tipping point,” said Richard Church, managing director of Discern Investment Analytics. “We are in a weak demand environment that could meaningfully accelerate next year.”

Inevitably when discussing the fortunes of retailers, the structural trend toward online shopping is offered as a counterexample of what might be a truly positive trend. If consumers are still shopping but now using smartphones instead of their feet, then that is bad news for Macys but terrific news for Amazon and the rest of the economy (productivity). The problem is, of course, finding the “net” shopper who is doing just that.

When analyzing the shift in consumer preferences it is usually presented as “all or nothing”, meaning that shoppers leaving bricks and mortar stores are bestowed with a convenience option that they are exercising. Instead, the shift toward online may not be separable from the “weak demand environment” at all. In other words, if consumers have become fickle about bargains and finding the lowest price, that may be just as much macro-economic as micro-economic. It may be that online retailers are best positioned in a downward economic transition because they can offer better prices without having the burden of the huge sales distribution costs that come with operating physical stores.

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Author: Travis Esquivel

Travis Esquivel is an engineer, passionate soccer player and full-time dad. He enjoys writing about innovation and technology from time to time.

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