Retail apocalypse: Too many stores (and jobs) are going, going, gone
Barely a week goes by when we don’t hear about another chain of retail stores declaring bankruptcy or slashing the number of stores nationally.
We’re only a third of the way through 2019, and already U.S. retailers have announced the closure of nearly 6,000 stores — 5,994, to be exact. That’s already more than the 5,864 stores that closed throughout the country in 2018. And the investment firm UBS projects that 75,000 stores could close by 2026. That would include more than 21,000 clothing stores, 10,000 consumer electronics stores, and 8,000 home furnishing stores. By then, online shopping is expected to make up 25 percent of retail sales, up from 16 percent now. Overall, retailers have closed more than 15,000 stores since 2017, UBS says.
It’s easy to think about this situation as just a change in buying habits — more people buy items online, and fewer patronize brick-and-mortar stores. That’s true; the average U.S. household spent $5,200 online in 2018, up nearly 50 percent from five years earlier. And people are still buying — retail spending overall grew 4.6 percent in 2018. But every time a store closes, people lose their jobs, especially women.
Economists differ in their projections about the world and the U.S. economy in 2019. Many see slower growth than in 2018, and some even predict a recession. The National Retail Federation sees a slowdown over last year’s spending, meaning that people won’t be buying as much, online or at physical stores. Even the latest report of economic growth showed a slowdown in consumer spending.
Retail sales make up 70 percent of economic growth, and projections on retail sales aren’t good. A healthy economy generates annual retail sales growth of 3 percent or more. But the report from February showed that sales fell by 0.2 percent.
Business Insider keeps a running total of the stores that have announced bankruptcies and liquidation. In some cases, filing for Chapter 11 bankruptcy allows companies to restructure and reopen on a smaller scale, shedding debt as well as employees. Other times, the stores’ workers are out of luck — and out on the street.
In 2019 alone, as of mid-April, this was the bankruptcy list (some of these are national, some are regional):
- Beauty Brands, a salon and spa company, filed for Chapter 11 bankruptcy in January. The company already had closed nearly half its stores in late 2018.
- Innovative Mattress Solutions, a Kentucky-based firm, filed for Chapter 11 bankruptcy in January.
- Shopko, a Wisconsin-based retailer, announced closure of all 363 stores when its owners failed to find a buyer after filing Chapter 11 bankruptcy.
- Gymboree, a children’s clothing company that also operated Janie and Jack and Crazy 8 stores, said all of its more than 800 Gymboree and Crazy 8 stores are due to close.
- FullBeauty Brands, an online plus-size clothing retailer, was in and out of bankruptcy in 24 hours.
- Charlotte Russe, a woman’s clothing retailer, announced plans to close all of its stores after it filed for Chapter 11 bankruptcy.
- Things Remembered, a personalized keepsake chain, filed for Chapter 11 bankruptcy so it could be purchased by another gift store chain while closing most of its 400 stores.
- Payless ShoeSource filed for its second bankruptcy in February (this is referred to as “Chapter 22,” after a business’s first go-round with Chapter 11). It announced closure of all of its 2,500 stores, which will affect 16,000 employees.
- Diesel, an Italian jeans company, filed for Chapter 11 bankruptcy after heavy losses and planned “some” store closures.
- Z Gallerie, a Los Angeles-based home furnishings retailer, filed for Chapter 11 bankruptcy and announced plans to close 17 stores.
- Roberto Cavalli, a fashion company that operated in North America as Art Fashion Corp., filed Chapter 7 bankruptcy, having already closed all of its North American stores.
Even this list goes out of date quickly: another day, another retailer announces major closures. Office Depot, operating under Office Depot and OfficeMax, is closing 50 stores this year.
A CNN Business wrap-up of bankruptcies and store closures also included many retailers that are struggling financially and are set to close stores:
Family Dollar will close 359 stores this year, while Signet Jewelers, the parent company of mall stalwarts Kay, Jared and Zales, will close 159.
Even thriving retailers such as Target (TGT)and Walmart (WMT) are quietly closing a handful of their stores — although those companies are opening some, too. And department stores such as Nordstrom (JWN), Kohl’s (KSS) and Macy’s (M) are shuttering a few stores each.
Republicans, especially Donald Trump, love to brag about the economy and a low unemployment rate, even though much of that growth is merely continued from the strengths of the economy during the latter part of President Obama’s administration. Yet even with a low unemployment rate overall, the Bureau of Labor Statistics reports that the retail unemployment rate is nearly 12 percent. BLS also says any growth in job opportunities in the retail industry is slower than the average for other occupations.
Trump and the media don’t pay much attention to retail layoffs. While women make up roughly half of all retail employees, store closures mostly affect women and minorities, not white men. From a story on U.S. retailers in The Guardian:
The retail sector has been the biggest loser of jobs for the last two years in a row in the US, as thousands of stores closed as shoppers moved online. It remains one of the US’s largest employers, providing 15.8m jobs, but the reordering of the retail landscape is having a profound impact on the nature of its workforce.
Between November 2016 and November 2017, the sector fired 129,000 women (the largest loss for any industrial sector for either sex) while men gained 109,000 positions, according to an analysis by the Institute for Women’s Policy Research (IWPR). In the whole labour force women gained 985,000 jobs over the year, while men gained 1.08m jobs. …
“There are still jobs being created in retail but they are jobs with different skill sets,” said Andrew Challenger, vice-president of outplacement experts Challenger, Gray and Christmas. But despite those gains “there is real job loss going on and we may not see those jobs coming back. In many cases these jobs are being lost in places where retailers are the largest employers in the area.”
Challenger described the losses as one of the most dramatic changes in the jobs market the US had witnessed since manufacturing was rocked by outsourcing and automation.
These aren’t high-paying jobs to begin with. The median hourly wage for retail salespersons was $11.63 in May 2018, according to BLS, and the average annual retail salary is only $25,310. When these workers are shown the door, severance packages are rare. According to a Vox story:
Some retailers have tried to revamp stores or introduce other new features to increase foot traffic to brick-and-mortar stores, but these efforts have been met with mixed results. Many of these formerly successful retail chains have filed for bankruptcy, including Payless, Sears, Toys R Us, Claire’s, and more. And that’s created ripple effects for workers, too: Toys R Us workers fought for (and won) severance pay after the chain filed for bankruptcy, and Sears workers are still fighting for severance.
All of these layoffs and store closures wouldn’t be as much of a problem if malls in the U.S. weren’t overbuilt to begin with. All of those closed stores, especially in emptied-out malls, make for a lot of empty real estate. A story in Forbes claims that the malls need to evolve and offer more services and “experiences” that people want, not just stores. In turn, these new offerings could provide work for laid-off employees.
Today’s shoppers are looking for more than just what’s just available on a website. They want an experience. Malls have always been a destination, but the concept of a “mallrat” no longer exists. The days of meeting friends at the mall and shopping all day are gone. Malls are still considered a destination, but it’s because they now offer amenities, experiences and entertainment to enhance the shopping experience. They are now not only anchored by department stores but with popular restaurants, bars, salons, cinemas, and fitness centers. …
What’s next as Generation Z shoppers take over as the big spenders and increase their shopping power? The answer: shopping malls must continue to transform to survive the generational changes. As with so many other areas of retail and beyond, it’s evolve or die.
It’s a nice idea, but those kinds of jobs will still be entry-level, low-paying work, and won’t do much to help a laid-off mom trying to put food on the table for her family.
Originally posted on Daily Kos on April 28, 2019.