2017 was a whirlwind for U.S. retailers, with more than 20 retailers filing for bankruptcy and brick-and-mortar store closures reaching a record 6,985, according to Fung Global Retail and Technology. But the storm isn’t over. In fact, it may be growing more severe.
One report from Cushman & Wakefield, a real estate firm, estimated that there were roughly 9,000 store closures in 2017, and expects that total to increase to more than 12,000 in 2018.
Another 25 retailers could file for bankruptcy within the next year, with the most likely candidates being Sears, Bon-Ton Stores, Bebe Stores, Destination Maternity and Stein Mart, according to S&P Global Market Intelligence.
While this sounds grim on the surface, it is important to recognize that the anticipated closures signal that retail will continue to undergo a transformation, rather than an apocalypse. Six retailers accounted for 3,658 (52%) of the 6,985 closures. That’s an indication that despite scary headlines, only a small fraction of merchants are responsible for most closures.
Additionally, some analysts argue that the store closures don’t tell the whole story of brick-and-mortar’s health going into 2018. An August 2017 report from IHL Group highlighted that U.S. retailers were opening 1,326 more stores in 2017 than they were closing, with the number jumping to 3,446 in 2018. For every chain with a net closing of stores, 2.7 companies showed a net increase in store locations for 2017.
But as the closures and bankruptcies continue, it’s clear that many retailers still need to improve the store experience by integrating it with digital channels, training store associates and creating strong brand experiences.
Malls Must Pivot To Experiences As Anchor Stores Close
Store closures will continue to impact the landscape of the mall and how it operates going forward. With Sears and Kmart closing a combined 358 stores in 2017, and JCPenney and Macy’s both closing 100+ stores, mall operators that had hosted these retailers as anchor tenants must seek new ways to fill those spots in 2018.
CoStar, a real estate firm, has estimated that nearly a quarter of malls in the U.S., or roughly 310 of the nation’s 1,300 shopping malls, are at high risk of losing an anchor tenant. As more of these anchor tenants close up shop, mall operators will have to focus on moving beyond shopping to a lifestyle mix with more entertainment options.
“Mall operators will have to create boutique-feeling spaces with multiple vendors so they’re not tying their fortunes to one particular tenant,” said Jason Green, CEO of retail and CPG consultancy The Cambridge Group in a prior interview with Retail TouchPoints. “It makes it more exciting for the shopper as well when there’s a variety of interesting, premium options available.”