Toys R Us and RadioShack were among large chains that declared bankruptcy in the past year while many others like Macy’s and Sears are continuing to announce more store closures.
Because retail stores are largely based on fixed costs, increased use of online shopping has drastically reduced the necessary profitability for most brick-and-mortar storefronts.
There will likely be a lot more casualties- but it may not be all bad… Sales from the holiday season have been getting better as wages and confidence have risen with consumers in the past few years.
Some retailers may be safe according to analysts. Discount chains and convenience retailers like Dollar General and Burlington Coat Factory are examples of sellers that put lower-cost products in the hands of customers before buying- unlike many online retailers in this space. Service based retailers like Home Depot sell specialized items that are often needed that day. Luxury retailers like Coach can control pricing based on each store. And let’s not forget food. Grocery stores will likely survive despite online and delivery options.
Some retailers like Best Buy acted early in the battle for retail supremacy and survived, unlike Circuit City. Best Buy is constantly exploring new ways to cut the costs of brick-and-mortar operations, even including vendor spaces in their own stores.
Despite mall store closures nationwide, some malls are not falling victim. Malls that are continuing to do well are usually ones that have high-end retailers, Apple Stores, Tesla showrooms, and other online retailers that are crossing over in the physical locations.
With the bifurcation of massive online retailers into brick-and-mortar, could the apocalypse be avoided? What do you think?
Source: T. Rowe Price