The impending retail apocalypse
Because of the coronavirus and people's buying habits moving online, retail stores are closing everywhere — often for good.
Why it matters: Malls are going belly up. Familiar names like J.C. Penney, Neiman Marcus and J. Crew have filed for bankruptcy. Increasingly, Americans' shopping choices will boil down to a handful of internet Everything Stores and survival-of-the-fittest national chains.
Driving the news: A research report from UBS predicts that 100,000 brick-and-mortar U.S. retail stores will close by 2025, in a trend that started before the pandemic and has accelerated amid coronavirus-related shutdowns.
- Indoor malls — which were turning into ghost towns even before the pandemic — are being converted into apartment complexes.
- E-commerce has surged, even as stores reopen, as people are afraid of catching the virus in crowds and public spaces.
- A relatively new retail model — buy online, pick up in-store — is gaining traction.
"Now that retailers are reopening, they're finding that they have to really look at their sales floor quite differently — it's about doing much more than just selling," says MJ Munsell, chief creative officer of MG2, a Seattle-based retail/architectural design company that counts Nordstrom, DSW and T.J. Maxx as clients.
- "They're having to adopt curbside pickup, locker pickup, buy online/pick up in-store. They're also looking at converting the sales floor to more distribution," or internet sales fulfillment.
Signs of the times: Valentino, which sells $875 sandals and $3,290 minidresses, has sued its landlord to get out of the lease on its four-story boutique on Fifth Avenue in New York, which is two blocks south of Trump Tower, per WSJ.
- The retail sector lost about 1.2 million jobs between March and June, according to Bureau of Labor Statistics figures released last week.
Many COVID-19 store closures that were supposed to be temporary will wind up being permanent. Among household names that have announced they're shuttering some stores for good: Nordstrom, Bath & Body Works, Gap, and Zara.
- Microsoft plans to close all of its retail stores, a plan that "was originally in place for next year, but was accelerated by the COVID-19 pandemic," according to The Verge.
- Coresight Research, which tracks retail store openings and closings, projects that a record 25,000 stores will close in 2020 — up from its pre-pandemic estimate of 8,000. (The prior record was last year, when 9,800 stores closed.)
"Accelerated Darwinism" is how Deborah Weinswig, CEO of Coresight Research, describes some of the retail bankruptcies of 2020 (not all of which resulted in widespread store closures). Fashion apparel has suffered the most.
- "We speak to a lot of liquidators about what's in the hopper. The recent conversations we've had suggest that the pace of bankruptcies is going to rise significantly," Weinswig tells Axios.
Budget retailers Dollar General, Dollar Tree and Five Below are bucking the trend — they plan to open hundreds of stores.
- Furniture and home furnishings are hot categories with so many people staying put, which means products are becoming scarce. "You can’t buy a patio set, because everybody’s vacation is right there in their backyard," Weinswig says.
In New York City, it's not just tourist hotspots like Times Square that are chockablock with "For Rent" signs and vacant (or boarded-up) storefronts. "Even before the pandemic hit, we had a genuine vacancy crisis" throughout the five boroughs, Scott Stringer, the New York City comptroller, tells Axios.
My thought bubble: The major retail corridor in my Manhattan neighborhood — East 86th Street — is practically unrecognizable. Gone for good are the Children's Place where I bought my kids' clothes and our local Barnes & Noble. Those losses feel like Piggy's glasses breaking in "Lord of the Flies" — a microcosm of a civilization's ruin.