Some of those stores have been in business, it seems, for decades.
The overall retail sector may have a lot in common with those stores.
According to "The Death of Retail is Greatly Exaggerated,"
As of early May, S&P Global Market Intelligence tallied a record 18 retail bankruptcies, already matching the total for all of 2016. The carnage is on full display in the new Fortune 500 list: Household names like Macy’s, Sears, and Kohl’s all took tumbles down the list, as did other struggling chains like GameStop (GME, -0.37%) (falling 19 spots, to 321) and Dillard’s (DDS, -0.94%) (which fell 37, to 417).
We began seeing/predicting the fact that retail would go through a rough 2017 back in Q1, and feel that it is a big issue because:
- The U.S. retail sector is a huge employer, including part-time and seasonal work: 15,836,200 as of May 2017 -- down from Feb. 2017 of 15,887,600, which represents a loss of 51,400 jobs, a significant drop in a short time. (By the way, back in 2012, the sector employed 29 million people, according to the National Retail Federation.) According to the NRF, which does a tremendous job of tracking the state of the retail industry, the retail sector "is the largest private employer in the United States. Retail directly and indirectly supports 42 million jobs." Basically 1/4 of all private jobs. We'll get to directly and indirectly in our third bullet.
- The U.S. retail sector holds leases and owns a tremendous amount of real estate. According to one estimate, there are more than 1,000 malls in America and that doesn't include downtown real estate holdings. In fact, Macy's real estate holdings by themselves may be worth more than the actual retail side of the business, according to Fortune's senior retail reporter, Phil Wahba, who also wrote the "Greatly Exaggerated" story. That said, those value and viability of those real estate holdings may be in jeopardy if suddenly they all came onto the market. We've already seen the impact of retail-store closings on Greenwich Village's Bleecker St. in a New York Times article.
- The U.S. retail sector contributes $2.6 trillion annually to U.S. GDP, according to the NRF, approximately 15% of the total economy. That includes retailing companies along with other companies that support the retail industry, such as logistics, including trucking and shipping; warehousing; construction and maintenance; agriculture; manufacturing; technology; and health care. Basically, if the retail sector takes a hit, the rest of the economy will suffer.
Does this mean the retail sector is dying? Not really. The parts of the retail sector is somewhat cyclical and other parts are very sensitive to external factors -- like the weather or other trends. So a downward trend, by itself, is not necessarily troubling. And some retailers continue to do well, including Walmart, Home Depot, Costco, TJ Maxx and Best Buy, according to Fortune.
What is troubling is that there's a fundamental shift going on, towards online and mobile. Bricks-and-mortar stores may no longer be about buying but sampling and community, according to another Fortune article. http://for.tn/2r8qLET. Instead, retail may seek to leverage: "newly available real estate to experiment with boutiques, showrooms, and pop-up shops." If that trend continues, it will mean a further decline in the number of full-time retail jobs and a further decline for companies that support retailers.
While reshaping retail to better meet the needs of consumer is good news, and more efficient, that's not good news for the long-term health of the sector. A lot of retailers that sell fashion commodities such as basic Ts and jeans will likely not survive in an e-commerce playing field.
And one more thing, which has been overlooked by retail reporters: According to the NRF, 98.6% of businesses employ fewer than 50 people. In a world in which most retail transactions take place online or via an app, these local mom-and-pop stores don't stand a chance. They may not have the skills and resources to move their business online, and may not be able to compete on price. They won't be able to survive the Amazonification of retail. This could decimate small retailers and small towns around the country.
That's going to be a big story the rest of 2017 and going forward.