Capital Investment Advisors

Recent Retail Bankruptcy Filings Show That The Way Americans Shop Is Changing

How Americans shop is changing, and those changes are having a far-reaching impact on a familiar part of our world. E-commerce’s siege of brick-and-mortar stores continues to take a devastating toll. Malls across the country are struggling to stay open. Storefronts are closing in droves. And it’s becoming increasingly more difficult to find replacements for lost tenants in retail space.

Over the last several years, emptied retail store spaces have been taken over by other types of businesses, like restaurants, entertainment spaces, movie theaters, hair and nail salons, and fitness studios. The reason? Consumers are now devoting bigger shares of their wallets to restaurants, travel, and technology than ever before, and spending less on apparel and accessories.

As a result, retailers are running out of cash, and many analysts believe 2017 will be a banner year for retail bankruptcies. Case in point: it’s only April, and nine big retailers have already filed for bankruptcy. For perspective, that’s as many as all of last year.

Recent retailer bankruptcy filings are at a level that harkens back to the most recent recession. Annual retail bankruptcies peaked at a total of 20 back in 2008 – a level that the U.S. could reach by September if the current rate of filings continues.

During the recession that year, private equity firms and banks came to the rescue of some retailers and brought them out of bankruptcy through restructuring. But these days there aren’t many firms willing to rescue dying retail chains. Over the next several months, more than 3,500 stores are expected to close.

Check Out: Outlet Malls Don’t Actually Have The Best Deals, Here’s Everything They Don’t Want You To Know

Among those taking the hardest hits are traditional retailers with large fleets of physical stores. Payless ShoeSource, hhgregg, The Limited, RadioShack, BCBG, Wet Seal, Gormans, Eastern Outfitters, and Gander Mountain are among some of the retailers that have filed for bankruptcy so far this year. As a result, most are closing hundreds of stores. On top of closures, retailers that are staying in business are shutting down a record number of stores. In fact, the pace of store closings this year is already ahead of what we saw in 2008.

If store closures continue, it’s hard to imagine that a solid supply of merchandising concepts would be willing to take over the vacant locations. Research shows that visits to shopping malls have been declining for years; just between the years 2010 and 2013, this number has fallen by 50%. According to recent data, more than 10 percent of U.S. retail space, or nearly 1 billion square feet, may need to be closed, converted to other uses or renegotiated for lower rent in coming years.

Brick-and-mortar retail stores are suffering, and there’s no quick fix in sight. The seismic shift in the way Americans spend their cash, rising retail rents, record-low vacancies, and the rise of e-commerce, all seem to point to the inevitable fate of even more stores going dark. But I think there is a cyclical element to this situation. I find it hard to believe that Americans want to buy everything online. Physical shopping is still a fun, popular activity, and there are some things best bought in person.

So, while there may be fewer brick-and-mortar stores in our future, I don’t think we’re headed to the point where shopping for just the right outfit for date night or finding perfectly fitted hiking boots only happens in front of a glowing computer screen.

Check Out: Sears is bleeding money, with commentators saying business has fallen into a death spiral

Previous ArticleNext Article