Inside Outdoor Spring 2017

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Store Closing Correction
Editor’s Letter
Martin Vilaboy
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Percy Zamora
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Ernest Shiwanov
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Berge Kaprelian
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Rene Galan
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Miki Takeuchi
Digital Media
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It’s a tough time to be a physical retailer. Daily headlines about store
closings and retail bankruptcies seem to signal the arrival of a dim future
– one we’ve been hearing about since the Internet boom of the 1990s. It’s
not likely these warning signs are about to abate.
Consultancy firm Cowen & Co. predicts as many as 2,000 more stores
may still need to shut their doors for companies such as JC Penney, Macy’s,
Gap and Ascena Retail Group, among others, to survive moving forward. Ma-
cy’s, for instance, recently announced the closing of 100 stores, or about 14
percent of its store fleet, but Cowen analyst Oliver Chen figures the retailer
ultimately may need to shut down about 21 percent of its doors instead. For
JC Penney, Chen said the chain may need to shutter closer to a quarter of its
store locations compared to management’s plan close about 14 percent.
“Up to 20 percent of malls will have to be repurposed or closed,” added
Chen. Bong goes the death knell.
Every quarter, during the earnings calls, we hear the reasons why. Retailers
are having trouble finding hot items and must-have fashions in a fragmented
culture. Amazon and other online plays are sucking up wallet share. Folks have
shifted spending from material goods to meals, experiences and entertainment.
All are very real trends and valid challenges, but none may be the main
driver of all those doors going dark of late. It’s very possible, rather, that
U.S. retailers simply may be coming to terms with true demand.
Compared to other markets, the U.S. is “overstored,” argues Chen. In the
U.S., there’s the equivalent of about 23.5 square feet of shopping center space
per person, according to Cowen’s findings. In Canada, the figure is 16.4 square
feet per capita, and in the U.K., France, Spain and Italy, it’s less than 5 square
feet per capita. U.S. mall growth, meanwhile, has significantly outpaced popu-
lation growth. The number of U.S. malls increased roughly four times since
1970, from 306 to 1,220 in 2016, the Cowen study showed. The U.S. popula-
tion, during that same time, has increased by only about 1.6 times.
That’s not to suggest once the fat is trimmed brick-and-mortar sales
return to growth and all is hunky-dory. Indeed, those executive excuses are
new realities. The point rather is that the current rash of store closings is
hardly a harbinger of physical retail’s demise.
After all, as much as 90 to 75 percent of retails sales, depending on the
SIC code, still goes through brick-and-mortar businesses. Meanwhile, Cow-
en’s consumer tracker and studies also showed that customers still prefer to
shop in physical locations for 75 percent of their shopping instances. It will
be decades, quite simply, before those numbers even approach 50/50.
During that time, physical retail no doubt will change and evolve in a
multitude of ways – some that have yet to be imagined. Even so, despite
the doomsday predictions around doors closing, the more likely scenario
is a future where the real and digital worlds co-exist and collaborate. Win-
ners will be those who find ways to simultaneous offer a unified experience
across every channel while still maintaining the unique benefits and func-
tions each one has to offer.
– MV
Inside Outdoor | Spring 2017 6