Not Fake News
Fake news. Or, at the very least, over-exaggerated news. That’s what I call the reports about the death of retail. Retail sales are up $121.5 billion (through the first seven months of the year) and the holiday forecasts look promising, with Deloitte predicting a healthy 4 to 4.5% increase over last season.
By far, the biggest myth being perpetuated about retailing has to do with the dire state of brick-and-mortar stores. Yes, the past nine months has seen a wave of bankruptcies and store closings. But what’s not being reported (at least not as widely) is all the expansion that’s still happening in physical retail.
The reality is that more stores are opening than closing. In total, chains are opening a net 14,239 stores and closing 10,123 stores in 2017. Forty-two percent of retailers will experience a net increase in stores, 15% will have a net decrease, and 43% will see no change in store count.
The data comes by way of an in-depth research report from IHL Group consulting firm. IHL reviewed more than 1,800 retail chains with more than 50 U.S. stores in 10 retail vertical segments. It found that for every company with a net closing of stores, 2.7 companies showed a net increase in new stores in 2017. Also, 751 brands are increasing their store counts this year, while 278 are reducing store counts.
“The negative narrative that has been out there about the death of retail is patently false,” said Greg Buzek, president of IHL Group. “Over 4,000 more stores are opening than closing among big chains, and when smaller retailers are included, the net gain is well over 10,000 new stores.”
The report, aptly titled “Debunking the Retail Apocalypse,” found that 16 chains account for 48.5% of the total store closures. Five (Radio Shack, Payless ShoeSource, Rue21, Ascena Retail Group and Sears Holdings Corp.) represent 28.1% of the total store closings.
The IHL report revealed the changing landscape of the retail industry. The three fastest-growing core retail segments are mass merchandisers, such as off-price retailers, discounters and extreme-value stores (opening 1,905 stores), convenience stores (1,700 stores) and grocery retailers (674 stores).
Other fast-growing segments include beauty stores, home goods stores and furniture stores. Among the retailers driving growth, responsible for a total of 4,162 openings, are Dollar Tree, Dollar General, Couche-Tard and Aldi.
Restaurants, including table-service and fast-food eateries, are adding a net 2,754 locations. New openings are being driven by such familiar brands as Dunkin’ Donuts, opening 200 locations, and Chick-fil-A, Taco Bell and KFC, opening 100 units each. Pizzeria franchisor Noble Romans is opening 200 locations.
On the flip side, specialty apparel retailers are experiencing the largest number of closings, with a net loss of 3,137 stores. But it’s not all doom and gloom: For every chain closing stores, 1.3 chains are opening new ones.
The IHL report does not view retail through rose-colored glasses, though. It lays out the rapid change that’s transforming the overall industry as well as individual segments. But it makes clear that many businesses are up to the challenge.
“The so-called &lsquoretail apocalypse’ makes for a great headline,” Buzek said. “But it’s simply not true.”
Marianne Wilson
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