August 16, 2019
Anyone looking at news about retail is faced with yet another store chain closure, and yet another bankruptcy. The retailpocalypse, as it is known, paints a gloomy picture, with publications such as the Washington Post pointing out that “many more stores are likely to shut down in the coming years . . .”
According to business consulting firm IHL Group, the retail gloom-and-doom is nonsense. In its recently released report, “Retail’s Renaissance, the True Story of Store Openings/Closings,” the Tennessee company does acknowledge that retail is undergoing a radical transformation. It also noted that, “the truth is, since January of 2017, the U.S. retail industry has increased sales by $565.7 billion and 8,575 stores.”
How can this be, especially amid the closures of apparel and toy stores? For one thing, not all retailers are created equal. There are, in fact, nine retail segments, including food/grocery, drug stores, convenience/gas, department stores and restaurants (which are, in turn, divided into table service and fast food). The IHL report noted that, while America is drowning in apparel, and department stores are struggling, seven of the nine segments are doing well.
Restaurants, for example, which IHL dubbed “the canary in the coal mine for retail,” is doing quite well, with sales increasing by more than $55 billion from Jan. 18, 2018- to June 19, 2019. In fact, “we are on pace for total restaurant sales of $744 billion for 2019,” the report said.
Then there is the so-called “Amazon effect.” While Amazon and other e-commerce sites are changing buying patterns. In 2017, retai sales growth was $232 billion. Amazon’s growth that same year was $29 billion.
The retailers that are struggling include department stores, sports/hobby/book stores and electronics/appliance stores. But in researching closures, it seems as though openings actually outpaced them. For example, in 2018, 19,731 stores closed, while 21,213 opened — meaning a net gain of 1,482 stores.
IHL also pointed out that the retailers that did shutter stores were those that were swimming in debt, and relying on outdated models of operation. This is what sunk Toys R Us, The Limited, Family Christian, RadioShack, Dress Barn, Gymboree and others that made headlines. In other words, “The health of retail is widespread,” IHL analysts said. “Those retailers that are sick, are limited to a focused group of retailers.”
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