Brick-and-Mortar Stores Are Shuttering at a Record Pace

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From The Wall Street Journal:

American retailers are closing stores at a record pace this year as they feel the fallout from decades of overbuilding and the rise of online shopping.

Just this past week, women’s apparel chain Bebe Stores Inc. said it would close its remaining 170 shops and sell only online, while teen retailer Rue21 Inc. announced plans to close about 400 of its 1,100 locations.

“There is no reason to believe that this will abate at any point in the foreseeable future,” said Mark Cohen, the director of retail studies for Columbia Business School and a former executive at Sears Canada Inc. and other department stores.
Through April 6, closings have been announced for 2,880 retail locations this year, including hundreds of locations being shut by national chains such as Payless ShoeSource Inc. and RadioShack Corp. That is more than twice as many closings as announced during the same period last year, according to Credit Suisse.

Based on the pace so far, the brokerage estimates retailers will close more than 8,600 locations this year, which would eclipse the number of closings during the 2008 recession.

. . . .

The seeds of the industry’s current turmoil date back nearly three decades, when retailers, in the throes of a consumer-buying spree and flush with easy money, rushed to open new stores. The land grab wasn’t unlike the housing boom that was also under way at that time.

“Thousands of new doors opened and rents soared,” Richard Hayne, chief executive ofUrban Outfitters Inc., told analysts last month. “This created a bubble, and like housing, that bubble has now burst.”

. . . .

As retailers rushed to expand their physical footprint, the internet was gearing up to do to apparel companies what it had already done to booksellers: sap profits and eliminate what little pricing power these chains commanded.

Despite the view that shoppers prefer to try on clothing in physical stores, apparel and accessories are expected this year to overtake computers and consumer electronics as the largest e-commerce category as a percentage of total online sales, according to research firm eMarketer.

Helena Cawley, 37 years old, said she used to be a “die-hard” department-store shopper. But with two small children, the Manhattan entrepreneur doesn’t have time to visit physical stores the way she once did. “I buy much more online now,” she said. “With free returns and free shipping, it’s so easy.”

Link to the rest at The Wall Street Journal (Link may expire)

As PG has mentioned before, he takes no joy in bookstore employees or anyone else losing their jobs. However the rapid and continuing reduction in the number of bookstores is part of a very large trend throughout physical retail.

By reason of its high density, mass transit options and (for many) high incomes, Manhattan should be almost the ideal location for physical retail to survive. In many parts of the island, billions of dollars in personal wealth are within a ten-minute walk of a store.

If online shopping is becoming more attractive than physical stores in Manhattan, traditional retail will have an even more difficult time in less densely populated urban areas.

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17 thoughts on “Brick-and-Mortar Stores Are Shuttering at a Record Pace”

  1. “By reason of its high density, mass transit options and (for many) high incomes, Manhattan should be almost the ideal location for physical retail to survive. In many parts of the island, billions of dollars in personal wealth are within a ten-minute walk of a store.”

    The problem with this idea (as it relates to bookstores) is that books the prices marked on the cover. They effectively cannot be marked up to take advantage of a market’s tolerance for high prices.

    • Nate, as I understand it, the main barrier in NYC (and the other four boroughs) is the high cost of real estate and rent.

      Books are sold to the bookstore for about 46% off the cover price, then the bookstore charges the cover price to the consumer. (This is why AMZ can offer such low prices, in addition to using books as a loss leader for many years).

      Do you mean a book would need to cost more in Manhattan, than say in Des Moines, to account for the costs in running a retail business–but the cover price means all books cost the same?

  2. Since you were kind enough to suggest I do so, PG, I wanted to send along a few links to articles that stand in contrast to your statement that “the rapid and continuing reduction in the number of bookstores is part of a very large trend throughout physical retail.”

    The bookstore portion of your assertion is not borne out either by my anecdotal experiences, touring bookstores for over 150K miles on the road, nor by other sources, such as:

    http://www.slate.com/articles/business/the_edgy_optimist/2014/09/independent_bookstores_rising_they_can_t_compete_with_amazon_and_don_t_have.html

    I have long been predicting that the big box model, never an apt fit for books, would suffer with the rise of online shopping, and this indeed seems to be so. It isn’t holding true for all bookstores though.

    This article that states that independent bookstores have grown by almost 27% since 2009, attributing this in part to the human or curator factor:

    https://www.buzzfeed.com/michelefilgate/the-rise-of-the-independent-bookseller-in-the-time-of-amazon?utm_term=.ty6Vkx6jo#.qoBDxm2Na

    Fortune magazine acknowledges the resurgence, then contextualizes it a bit:

    http://fortune.com/2013/09/20/the-indie-bookstore-resurgence/

    Finally, here is a compilation of sources, for those looking to read about the other side of the fence:

    http://bookweb.org/for-the-record

    • Anonymous–read my comment before you make that assumption. Independent Bookstore Day has been joyfully celebrated for years now. Less a gimmick than an acknowledgement of those customers who do take pride and enjoyment from their local bookstore. There are plenty such, along with many who divide their book buying between B&M and online, and others who only shop online.

      By far the greatest slice of our population, sadly, does not read at all. This is something that must be remedied at the grass roots level, one by one by one, and has been done so at times thanks to bookstores in ways that can only happen IRL.

      • I would certainly agree that the large Number of people who do not read is an issue, and this is why I think book buying should be as simple and convenient for the customer as possible, something which Amazon has pioneered.

        • Anon, yes–but although we gain much, we also lose something with “simple” and “convenient,” and that is why I believe a backlash is building, as heralded by the times a bookstore is lost and the community rallies to open one as a co-op (Ithaca, NY), or an author steps in to do so (Nashville, TN), or a twenty-something couple resurrects the profession (Pittsburgh, PA and Minneapolis, MN), along with a host of other examples.

          As much as online living offers–and it’s a lot–so does it take away. People are feeling the isolating effects, and the loss of the inevitable wrinkles and complexity of life lived in a less processed way. I know I am condensing a lot of my thinking here–apologies! Clearly a topic that hits me strong.

          One related book you may want to check out (order online 🙂 is Sherry Turkel’s RECLAIMING CONVERSATION. The more we live in bubbles that process all transactions, the more our emotional intelligence and relational skills erode. And to be far-less high falutin’ about it, the lonelier we get…and I feel like I am seeing and hearing about that everywhere I go.

          An independent bookstore is like the anti-that 🙂

  5. Consumer culture is changing in many ways due to the internet.
    And it’s not just a move to online shopping. Even B&M shopping is changing. For example, in books there have so far been four successive revolutions fostered by the internet; online shopping for new books,online shopping for used books, the rise of ebooks, and the rise of Indie, Inc. There’s more to come.

    Similarly, in B&M, we are seeing a clear shift to online-supported sales and a less publicized but substantial shift to used merchandize.

    https://www.washingtonpost.com/news/parenting/wp/2017/04/25/the-rise-of-the-consignment-parent/?utm_term=.c44c7462adfa&wpisrc=nl_rainbow&wpmm=1

    Conspicuous parsimony as a virtue signal is on the rise.
    If the trend takes off and spreads the impact will be enormous. And yet another challenge for tradpub.

    • ONe of my goals–after a pretty spendthrifty forties/early fifties–is to become a cheapo. Frugal is in. Simplicity is in. And hubby and I want on board that train to save moolah for retirement, fluff up that 401K nest loads.

      There is definitely a solid frugality movement and, hah, people are making money selling frugality books/tips/resources to those seeking to get off the consumerist path. And no one feels bad at all in my circle saying they got their clothes at thrift shops. In fact, you get to brag how LITTLE you spent for your outfits.

  6. Just last night, my wife knocked over a wine glass, shattering it and leaving us without any matching pairs left. I jumped on Amazon and will have a new set of four here on Monday, courtesy of Prime.

    I cannot tell you how happy I am to not have to go to Target for that.

  7. And record numbers of people are finding it saves them time and money to shop online. I’m amazed at all the shock and awe over B&M sinking as their rents and store clerks cost keep going up in overpriced neighbourhoods, that and most of us having less ‘mad money’ to toss at them.

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