July 26, 2022
Good morning, Retail readers!
Situational awareness: Shopify is laying off around 1,000 workers, or 10% of its global workforce, according to an internal memo — a dark cloud for big bets made on e-commerce during the pandemic.
1 big thing: Store openings continue at a brisk clip
Halfway through 2022, retailers have opened 4,283 stores amounting to an estimated 73.2 million square feet of retail space, according to Coresight Research.
Why it matters: Physical stores are seeing a resurgence as a key part of retailers' omnichannel strategy.
- The number of store openings compares with 1,766 store closings announced so far, equating to an estimated 29.1 million square feet.
State of play: Brick-and-mortar stores have become marketing tools, introducing shoppers to new brands and cultivating in-store experiences to entice customers to return.
- Digitally native or mature online businesses looking for growth will need to create compelling retail experiences, says Steve Dennis, president and founder of SageBerry Consulting, and a former retail executive.
- That said, there's plenty of demand for essentials for a low price at a location conveniently near shoppers — demonstrated by the trio of dollar-store giants topping the chart.
Yes, but: Like many of the recently released data points on retail and consumption, these latest results are lagging indicators, says Spence Mehl, a partner at RCS Real Estate Advisors, which works with a number of retailers.
- Stores take months to open from finding the right location to negotiating the lease to designing and building the store itself, he tells Richard.
- With looming economic uncertainty, retailers have begun to scale back their plans, the effect of which will become clear in about six months, Mehl says.
By the numbers: While the chart notes banners opening the most locations, CVS Health, Foot Locker and Rite Aid have shuttered the most stores.
- Amazon, 10th on that list, is slated to close 57 locations this year.
- Though Macy's is not among those closing the most stores, it is first in mothballing the most square footage, more than 9 million square feet.
- The coming holiday season will determine whether the industry will see another wave of store closings, says Mehl.
Meanwhile, digitally native brands such as Warby Parker, Fabletics, Psycho Bunny and Vuori are also opening stores, between 20 and 40 apiece.
- "But the jury is out on how successful that strategy will be at any scale," SageBerry's Dennis tells Richard.
The intrigue: The rise of "medtail," a melding of health care and retail, is increasingly visible in malls and on main street, Mehl points out.
- Amazon's $3.9 billion play for primary care operator One Medical is the latest example of this phenomenon — and that deal could have implications for big-box retailers looking to keep up with the e-commerce giant.
The bottom line: Reports of the physical store's death were greatly exaggerated — at least, for the time being.