Over 20,000 stores have shut shop and over 200,000 Americans have lost their jobs. The conventional retail sector faces slow but steady annihilation.
When Forever 21 became the latest victim of the bankrupt brigade in brick and mortar retail companies, the number of big names in the US that became extinct in the last three years went to 21. The rise of e-commerce, coupled with trends like changing consumer preference, shopping behaviour and efficiency in the process of buying have hit the traditional retailers hard.
In US, over 20 Retails Giants have gone bankrupt, 20,000 stores have shut and 200,000 jobs have been lost since 2017.
A rapidly evolving customer landscape has seen a sharp decline in Mall traffic where decades-old big brands have made their fortunes in the US. The infiltration by internet led solemnly by Amazon has made the game unforgiving. While a few have been somewhat successful in surviving with transitioning to online or hybrid models, several of the brick and mortar bigwigs have been forced to wind up operations and file for bankruptcy.
Trajectory since 2016: Retail Giants that went extinct
Back in 2016, popular cultural icons Aeropostale, Pacific Sunwear, Sports Authority and American Apparel headed the bankrupt retail companies in US. In 2017, at least 19 medium to big retailers shut shop. Among them were names like U.S. women’s apparel chain The Limited closing 250 stores, Eastern Outfitters, 140 stores and 6 decades old Vanity, Hhgregg with nearly 90 stores, 1,200 RadioShack locations, century-old, off-price department 100 store chain Gordmans.
The global ones include off-price shoe retailer Payless Shoesource with over 4,400 stores in more than 30 countries, teen clothing Rue21 with more than 1,100 stores and the biggest being Toys R Us with $4.9 billion in debt and 1,600 stores globally. Then in 2018, 125-year-old Sears, once the largest retailer in the U.S., headed the bankruptcy brigade. Other major stores include Brookstone, Rockport, Nine West, Bon-Ton Stores and A’gaci. Subsequently in 2019 came Beauty Brands, Innovative Mattress Solutions, Shopko, Gymboree, and iconic Jeans company Diesel USA.
Impact of the Economy
With such big names, thousands of stores shut down and thousands of employees will lose their job. Dozen’s retailers including major department store chains, mattress sellers and shoe companies in a time when strong consumer spending was giving the U.S. economic momentum. Bankruptcy and liquidation are disastrous for employees. Sears had 70,000 U.S. citizens on its rolls when it went bankrupt.
This downfall of retail companies in the US going bankrupt over the past years have reached record numbers. Store closings are making thousands of jobs that employ Americans vanish. Brick-and-mortar now looks like a sector perpetually in recession and on the brink of extinction. In 2019 alone, US retailers have shut 8,200 stores, a 1,500-stores increase from 6,700 in 2017, as per Coresights Research. This number is estimated to reach 12,000 by the end of the year. Consequently, unemployment is at a half-century low of 4%.
The Job Loss in Numbers
The retail sector is one of the biggest employers in the American economy with 15.8 million jobs. That’s over 10% of all jobs in the US. Behind health care and government, retail is the third largest employment sector in the US. In 2017, it lost almost 200,000 jobs, the majority in department and clothing stores.
Some of these workers are able to find new jobs in e-commerce warehouses and supply chains. However, with the global recession looming large, the unemployment numbers are expected to grow. Moreover, these employees make up the low-paying community which is sizable and particularly vulnerable to inflation. Thus, the social effects of retail demise could worsen with time.
Who will survive and who will vanish?
While e-commerce relentlessly increases its base, not all US retail companies will suffer the same fate and go bankrupt. Some have successfully transitioned with Hybrid online models, while some will look at bankruptcy as a way to restructure. But several have shut shop completely. Mid-aged workers having to face the challenge of acquiring new skills for re-entry into the employment fray.
However, for the future of brick and mortar firms, vital lessons lie in the remains of the dead. Keeping pace with the rest of the industry is vital. Moreover, the constant evolution of the business model is at the center of survival in the age of the internet. The technique has been successfully applied by retailers like Walmart and Target. They made more investments in stores but also went big online. Conventionalism will find it tough to survive.