U.S. Retail 2008
WILL THERE BE MORE CLOSINGS?
Earlier this year I wrote that 3000 to 5000 stores
would go out of business. Some stores would just be gone, such as Bombay
Co. and Whitehall Jewelers, and others would reduce their number
of stores. Unfortunately I seem to be on target, if not a little low in my
projections. However, could our current economic crisis be a sign of better
times for some? Yes, or at least a strong maybe.
In the past I have been reluctant to name the companies
that I predict will close. I am not sure why, since few read this
newsletter, and if they did, my opinion seldom would change anything.
Therefore, I forego my hesitancy and will identify a few. Hopefully I am
wrong but here goes.
Customerbob’s PREDICTIONS
Department Stores
Lord & Taylor.
Not exactly a thriving chain before the recent owners and now heading for
the end. Why? To put it bluntly, “who needs them”? At one time Lord &
Taylor was one of the best chains at making you believe that its
selections were unique and that shopping its stores put you in a special
class. In fact, Lord & Taylor was always a moderate store but
camouflaged reality with great New York Times sketched ads, fashionable
shopping bags, galas and the non-collapsible gift boxes. During a period of
time up until the late 1980’s, it worked for them. Now, Lord & Taylor
is just another store in a mall with Macy’s or Dillard’s or
Bon Ton or Boscov’s with nearly identical assortments, except
that Macy’s and Dillard’s have more, and Bon Ton and
Boscov’s have less, but cheaper.
Boscov’s.
Well once again, who needs them? Boscov’s has the same merchandise
as Kohl’s except Kohl’s has wider assortments, higher
promotional activity, and is newer and
easier to shop.
Bon-Ton and Dillard’s. Not closing, but
reducing, and again, they offer for the most part the same as Macy’s
and Macy’s has more.
Another
Jewelry Chain
If not a closing, at the very least a dramatic
reduction of doors at Kay, Zales, Gordon, Bailey Banks and Biddle,
and I must be missing a couple of other chains here.
A Book
Store
I suspect that either
Books a Million or Borders
will go or, if not, will close many doors. Barnes and Noble
will also shutter some stores. I do wonder why none of the book stores have
embraced electronic books. (Think Kindle at Amazon.)
A Toy
Store
Toys”R” Us.
Of course a reduction of stores, but I think they will be gone, and
KB Toys will not make it.
Young
Contemporary
A minimum of two adolescent “fashion” stores will be
gone and many will shutter doors. There are just too many of this genre. A
non-exhaustive inventory includes Wet Seal, Hollister Co., XXI Forever,
Aeropostale, Abercrombie & Fitch and American Eagle Outfitters. Youth
business is great when it is great, but the combination of changing
purchasing habits (this customer continues to buy new phones, iPods,
increased communication services), the number of stores that sell similar
merchandise and a dramatic reduction in their source of income will cause
failures in this retail segment. No, they did not lose their jobs. Their
parents did.
Electronic Stores
Circuit City.
Chapter 11 after Christmas, followed by a quick trip to liquidation.
Radio Shack will have a 20-25% reduction in stores and a challenge to
sustain the remaining stores given their business model. Small independent
electronic chains and local electronic stores will be gone.
Off-Mall
Apparel Stores
Goody’s is
already bankrupt and will be gone. Between Fashion Bug, Dress Barn
and other like stores in off-mall locations, one or more of these moderate
stores will bite the dust.
WRAP-UP
The loss of these companies can be attributed to
multiple factors. Many were weak merchants with weak locations before the
recent business downturn. They survived on traffic driven to them by
external events or the mix of other retailers in their locale. Often they
poorly managed their promotional events, simply adding an event to create an
artificial sales increase that must be repeated the following year, usually
at greater expense and at best with the same results, just to break even.
Eventually every week is promotional and the reality that their core
business model is wrong sets in. Additionally, only so many outlets are
needed for the same merchandise and if the store cannot establish a
differential in some other way (price, location), it is simply extraneous.
And last but not least, finances play a major part in the loss of some
stores. The extreme tightening of the credit market has not only hit the
consumer’s ability to spend, it has affected the store’s ability to finance
its inventory and to get through the inevitable peaks and valleys of the
retail cycle.
Well, that was easy. I did not mention Sears/Kmart.
Two year ago I thought this newly blended company would be gone in five
years. I still think so, but there may be a way for Sears/Kmart to
survive.
More on that some other time. See you soon.
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