Retail Apocalypse: Retail Stores Closing and Filing for Bankruptcy

With the shift of a lot of shopping going to the Internet, retail chains are struggling. Many have recently filed for Chapter 11 bankruptcy, and there are an unprecedented number of retail stores closing across the U.S. It’s easier to log onto a website and shop than it is to go into a store and look around. There is more convenience in online shopping. You can be comfortable at home, and they are more likely to have the style and size you are looking for. So how will any of these retailers hang on to their in-store customers? How will they survive the online shopping boom? Some of them wont, and we are going to take a closer look at this problem.

Stores Aimed at Teenage Shoppers

Many of the recent struggling retailers are those like Wet Seal and The Limited. These brands are targeted at teens and are an in-the-moment brand. Young shoppers won’t have an extended loyalty to these stores as they get older. Over the course of two years, Wet Seal had a staggering loss of $150 million. The company filed Chapter 11 bankruptcy and closed more than 330 stores nationwide in 2015. In January of 2017, The Limited’s women’s chain also took a hit from online shopping, closing all 250 of its remaining stores. In February, Wet Seal filed for bankruptcy again and also closed the rest of its stores.

Abercrombie and Fitch has also been hurt by these in-the-moment shoppers, with fast fashion stores like H&M coming out on top. The chain had to close 60 stores at the beginning of 2017. To keep customers coming, A&F took a new approach with more customer engagement. By creating a fashion runway with mannequins in the middle of the store and allowing customers to change the lighting in the dressing rooms, A&F are hoping to keep the customers coming. This is a new fast way of customer engagement, and in the instant gratification shopping age, this idea just might work.

Major Retail Chains

Retailers aimed at teen shoppers are not the only stores feeling the effects of online sales. JC Penney, once the go-to retailer for middle America, plans on closing 150-300 stores nationwide in 2017. Under a former executive for Home Depot, Marvin Ellison, it appears the retailer most known for apparel sales is attempting to broaden its appeal. Imitating stores like Sears, Roebuck & Company, JC Penney is opening more showroom stores for appliances, custom blinds, and flooring options. This may be one way to keep the retailer going as they try to maintain fewer retail stores and build up a home improvement side to the business. Only time will tell if this works.

Sears was one of the first retailers to feel the pull of online shopping starting a over a decade ago. Sears and its sister discount store, Kmart, closed 130 stores in 2016 and are set to close an additional 150 this year. Kmart has a history of financial struggle. It emerged from bankruptcy protection in 2003, and merged with Sears around that time. It will be interesting to see if retailers that are going a new route, like JCP, will hurt Sears even more as they increase in overlap.

American retail icon Macy's is also set to take a punch from online shopping this year as it is geared to close 100 stores. It is also selling some of its prime locations in hopes of keeping a profit off of a few of its brick and mortar stores. It’s clear that Macy's will need to revamp its presence, but this could take years.

Retailers for Specific Shoppers

It's not just major retailers that are hurting, as businesses geared at specific demographics are closing shop as well. Children's Place is planning to close 300 stores by 2020. Knowing this is coming, the retailer has struck a deal with online powerhouse Amazon.com to sell its clothing online while using Amazon as a replenishment program of sorts. By closing these stores, Children’s Place will attempt to boost inventory production and connect with a larger audience of internet shoppers. This seems to be a good option for them, as parents are busy, and online shopping is easier than dragging your kids through the mall to shop for clothes.

Another retail-specific store that did not hold up well to Internet shopping is RadioShack. The electronics seller closed 552 stores this spring. Websites like Amazon.com and NewEgg.com have become a hub for electronic consumers, and RadioShack could not handle the loss of customers. If you want to read more about RadioShack’s long history and current struggles with bankruptcy, check out a more in-depth blog on the topic here. Other electronics-based retailers like Circuit City also fell victim recently.

The Future of Retail

What does this all mean to the U.S. retail store market? Some stores, like Abercrombie and Fitch and Children's Place, have started making changes to try to keep up. Others have already failed.

The unprecedented amount of brick and mortar retail stores closing over the past few years reveals a change in technology and society’s views towards shopping. It shows that we are now in a time where consumers care less about brand loyalty and more about instant gratification. Yes, you still need to wait for your purchase to arrive in the mail, but the consumer knows it’s on its way. The product has been purchased. No walking the mall looking for the right dress, no needing to travel to another store to get that shirt in the right size, and no need to return to the store when that Bluetooth speaker is shipped from another location. All these things can now be done from the comfort of your own home.

Attorney Dan Higson can help with your bankruptcy case, and can answer any questions you have about Chapter 11, Chapter 13, and Chapter 7 bankruptcies. Contact Dan today at 805-644-7111!