Surviving the 2017 North American retail apocalypse

retail apocalypse

The retail meltdown in North America has been rapid, and Amazon is not the only reason.

For years, the chatter on high streets about e-commerce driving brick and mortar stores out of business has been growing louder. The murmurs began in 1994 when Jeff Bezos started a virtual bookstore, Amazon, out of his garage. When these “rumours” first surfaced, retails giants vehemently denied it. What’s more, they continued to soldier on, inventing ways to stay relevant and maintain foot traffic. 20 years later, they have accepted the reality – the brick and mortar retail industry is dying a slow and painful death.

The beginning of the end

American stores are struggling with declining foot traffic, liquidity issues, and supply chain interruptions. Nine retailers including Payless ShoeSource, hhgregg, RadioShack and Gander Mountain have filed for bankruptcy so far. A similar number of retailers closed their doors in 2016.  Industry watchers fear the industry is heading towards the highest number of closures since the 2009 recession when 18 retailers shut shop. But this is only the start of the retail apocalypse.

Stores like rue21, JC Penny, Crocs, GameStop, Aeropostale, American Eagle, Chicos, and The Children’s Place have announced closures of over 100 outlets! The fact that Moody’s has placed Sears along with 18 other retailers (Claire’s Stores, Nine West Holdings, 99 Cents, Gymboree, David’s Bridal and J Crew) on bankruptcy watch is even more alarming.

Macy’s, CVS, Abercrombie & Fitch, Guess and Staples have also been forced to drastically reduce their store portfolio. Stocks of retailers like Lululemon and Urban Outfitters have hit multi-year lows. The luxury retail market is also being threatened. In early April, Ralph Lauren announced the closure of its flagship Polo store on Fifth Avenue, New York. High-end women’s clothing chain BCBG closed120 stores.

Thriving e-commerce businesses, oversupply of retail outlets and changing cultural perceptions have contributed to the American retail meltdown.

Read: The “Lowely” journey from brick and mortar to digital

The cyber world of shopping

Traditional retailers are closing. There is growing unrest from the population because there is lack of choice in terms of price, fashion and selection. As a result, shoppers are increasingly turning to online stores and discount merchants for better deals. Amazon is the biggest key player. The online behemoth earned $135.99 billion in 2016, up from $74.45 billion in 2013!

However, Amazon is not the be-all and end-all of e-commerce. During the 2016 holiday season, retailers earned a record $91.7 billion in online sales, an 11 percent increase from 2015! Mobile shopping brought in $28.4 billion, a 23 percent increase from 2015. Easy return policies, e-fitting rooms, and the comfort of searching for good deals from your own living room instead of shop-hopping has made online shopping attractive for customers. It has reduced incidental purchases and mall foot traffic!

“Brick-and-mortar stores have not embraced online. They have tried to take their stores and put them online and have left out the experience. They don’t quite understand how to engage with the customer like we do in-store. We have to bring that to life online. The consumer needs the retailer to engage with them,” explained Joanna Arhontis, author of The New Retail Revolution: Bricks and Mortar Stores are not Dead Just Different in a Forbes article.

“Understand that it is even harder to keep the consumer on your webpage if you don’t grab their attention in the first 5-10 seconds. You lose them and may never get them back. You as the retailer need to give them as much knowledge and information as if they were standing in your store.”

An oversupply of malls

The USA has around 1,200 malls, 40 percent more than Canada, five-times more than the UK and 10-times more than Germany. Economics dictate that when supply exceeds demand, the industry declines. According to a study by Cowen Research, stagnating wages and rising healthcare costs have forced consumers to curtail spending and become bargain-hunters, which has hurt department stores like Sears.

Mall visits have also declined by 50 percent. Real estate research firm Cushman and Wakefield said that footfall fell from 35 million in 2010 to 17 million in 2013! Another important factor is how they are structured – most of them are retail bundles or have co-tenancy clauses. When anchor stores like Macy’s close, it has the potential to pull the curtains on the mall itself! Malls are no longer the preferred hangout spot. People prefer to travel or eat out with friends. Malls must reinvent themselves, offer better food, fitness and entertainment options to bring back the crowd.

Oh Canada!

Canada has escaped the retail apocalypse that’s hit its southern neighbour, and provides valuable lessons for the industry. According to CBRE, shopping centre square footage per capita is 16.5 in Canada, less than USA’s 23.6.

Three of Canada’s busiest malls (CF Toronto Eaton Centre, Royal Bank Plaza, Centre Eaton Montréal) are in downtown cores while all the busiest US malls are in the suburbs. Eight of the top 10 busiest Canadian malls are connected to major rapid transit. Higher shipping costs and a low population density have also slowed the rise of e-commerce in the country.

One of the reasons for the continued success of the Canadian retail market is that shopping centres are constantly enhancing their food and beverage options. A Retail Council of Canada (RCC) study found out that consumer comfort while shopping is a priority for landlords. Pop-up/curated retail is increasing and luxury stores and aspirational retailers are joining hands with their traditional counterparts in malls.



Nithya Caleb | The Edge Blog


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