The U.S. might be in an economic recovery, but American retailers are closing their doors at a record pace. So far, more than a dozen national retailers have announced they are either downsizing or going out of business altogether. That’s more than twice as many stores were closed at this time in 2016.
American Apparel, Bebe, The Limited, and Wet Seal announced they were closing all of their stores, and Hhgregg announced it was going out of business.
BCBG filed for chapter 11, J.C. Penney, RadioShack, rue21, Macy’s, and Sears all announced they would be closing down more than 100 of their stores. Payless filed for bankruptcy and Sports Authority has liquidated. Moreover, many retail giants like Lululemon, Urban Outfitters, American Eagle, and Ralph Lauren are seeing their share prices hit multi-year lows.
The death of so many American retailers also means the death of the once ubiquitous shopping mall. More than 10% of U.S. retail space, or close to one-billion square feet (the equivalent of 17,361 football fields), may need to close as a result, be converted into other uses, or renegotiated for lower rent.
The decline of the retail environment in the U.S. is also taking a toll on jobs. U.S. retailers employ 15.9 people, or around one in every 10 U.S. workers. In March, retailers cut around 30,000 jobs, the same as in February, marking the worst back-to-back showing since 2009. In April, retailers cut the most jobs at 11,669 job cuts. This brings the 2017 total to 50,133, a 36% increase from the first four months of 2016.
While the death of the U.S. brick-and-mortar retail sector is being largely blamed on Amazon, the online retail giant, there is more going on. Retail sales account for roughly half of U.S. consumer spending, which makes up more than 70% of the U.S. economy.
For U.S. consumers to prop up the retail sector, they need to have disposable income.
The U.S. expansion may be in its ninth year, but it’s also the slowest expansion since World War II. Moreover, wage growth is anemic, household debt levels have surpassed Great Recession levels, and savings are depleted.
That said, while America’s shopping habits are changing and moving online, U.S. consumers prefer to shop in stores 75% of the time. They key is for retailers to create the right experience and for the U.S. economy to create secure, well-paying jobs.
“Hundreds of stores closing as retailers face ‘Amazon effect,’ other challenges,” Richmond Times-Dispatch, May 22, 2017.
“Despite the bloodbath in retail, job cuts plummet in April,” CNBC, May 4, 2017.
“America’s Retailers Are Closing Stores Faster Than Ever,” Bloomberg, April 7, 2017.