NASHVILLE—An oft-told story making the rounds these days is that brick-and-mortar stores are in partial if not total eclipse. However, IHL Group says otherwise, reporting that US retailers will open 4,080 more stores in 2017 than they are closing and plan to open over 5,500 more in 2018. The Nashville-based research and advisory firm's new report on the subject, “Debunking the Retail Apocalypse,” is available by clicking here.
“The negative narrative that has been out there about the death of retail is patently false,” says Greg Buzek, president of IHL Group. “The so-called 'retail apocalypse' makes for a great headline, but it's simply not true. Over 4,000 more stores are opening than closing among big chains, and when smaller retailers are included, the net gain is well over 10,000 new stores. As well, through the first seven months of the year, retail sales are up $121.6 billion, an amount roughly equivalent to the total annual retail sales of The Netherlands.”
IHL reviewed over 1,800 retail chains with more than 50 US stores in 10 retail vertical segments. It found that for every chain with a net closing of stores, 2.7 companies showed a net increase in store locations for this year.
Forty-two percent of retailers will have a net increase in stores this year, while only 15% have a net decrease and 43% report no change, according to IHL. For instance, core retail segments will see a net gain of 1,326 stores, while table-service and fast-food restaurants are adding a net of 2,754 locations. In total, chains are opening a net 14,239 stores this year while closing 10,123.
In fact, store closings are a fact of retail life, and always have been. “Rebalancing store portfolios is a function of any chain retailer's business,” the report states. Each year retailers close underperforming stores—or should close them—and open stores in new locations. “If there is one mantra that has become the norm from the Great Recession, it's to learn to fail quickly. Savvy retailers have learned to cut their losses and close their stores quickly and move on to more profitable regions.”
The report says the three fastest growing core retail segments are mass merchandisers such as off-price retailers and dollar stores ( with net openings of 1,905 stores), convenience stores (+1,700 stores) and grocery retailers (+674 stores). Specialty apparel retailers are seeing the largest number of closings, with a net loss of 3,137 stores. Yet, for every chain closing stores, 1.3 chains are opening new stores, says IHL.
When it comes to chains shuttering locations, only 16 chains account for 48.5% of total number of stores closing. Five of these chains (Radio Shack, Payless Shoesource, Rue21, Ascena Retail and Sears Holdings) represent 28.1% of the total stores closing.
“Without question, retail is undergoing some fundamental changes,” Buzek acknowledges. “The days of 'build it and they will come' are over. However, retailers that are focusing on the customer experience, investing in better training of associates and integrating IT systems across channels will continue to succeed.”
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Paul Bubny
Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.
