The retail apocalypse is just getting started. Brick-and-mortar stores are dying, shopping malls have metastasized into zombies, and ecommerce is only getting bigger. It’s a tough time to be in retail.
There’s even more bad news.
The vacancy rate in U.S. malls swelled to 8.4 percent in the first quarter of 2018, up from 8.3% in the previous quarter, which is the highest it has been since the end of 2012. Moreover, according to The Wall Street Journal, community and neighborhood shopping centers in most of the 77 areas tallied by real estate data firm Reis experienced a surge in the vacancy rate during the 12 months ending March 31.
Last year, more than 8,000 retail stores shut down, doubling the average annual store closures in the prior decade.
Liberty Nation wrote in July 2017:
Richard Hayne, CEO of Urban Outfitters, perfectly highlighted what happened during a quarterly earnings conference call in March. He explained that retail square feet per capita in the U.S. is currently six times greater than in Europe or Japan, which is a trend that commenced in the 1990s and early 2000s when too much square footage capacity was added.
Essentially, the American retail landscape has an over-store problem – the epitome of a real estate bubble:
This created a bubble, and like housing, that bubble has now burst. We are seeing the results: doors shuttering and rents retreating. This trend will continue for the foreseeable future and may even accelerate.
Unfortunately, retail stores may not necessarily survive by simply trimming the number of stores they maintain. Stores have failed to adapt to changing market conditions, whether it is through technological innovation or tumbling sales.
Reported sales at general merchandise stores in February 2017 were the same as they were in August 2014. Department store sales in February 2017 were down 15% compared to the same time in the prior year, which is the biggest drop in U.S. history. Retail comparable-sales growth have been at their weakest since the ’08 Great Recession. As of May 2017, the monthly sales rate was down about 30% from the pre-recession peak – retail store sales have cratered more than 50% since the early 2000s. When sales are adjusted for inflation, the nominal sales rate is sitting in recession territory.
The retail apocalypse will inevitably claim more victims as more consumers head online and go broke.
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