Amazon Effect May Have Led to Target Closing 12 Stores in 2018
The retail industry has been having a rough go of it in 2017, and that trend looks like it will hold, going into early 2018. Target Corporation (NYSE:TGT) is no stranger to the difficulty that many retail giants have faced in the current economic climate. Online shopping and e-commerce retailers like Amazon.com, Inc. (NASDAQ:AMZN) have devoured the sales of many brick-and-mortar stores.
This has led to massive retail store closings across the U.S., and a significant amount of job cuts. And the trend is likely to continue. In fact, Target closing stores in 2018 will likely be the first blow to the retail industry in the new year, with 12 of its stores closing across the country after the holiday shopping season.
Some have termed the malaise faced by brick-and-mortar retail stores the “Amazon effect.” Consumers are, with increasingly regularity, forgoing malls and physical stores in order to do more of their shopping done online. The lack of travelling, crowds, and other factors make the convenience of online shopping highly enticing to many, with traditional retailers struggling to find a way to compete.
Target to Close 12 Non-Profitable Stores in February 2018
Target will begin shutting down stores on February 3, 2018. The impact will be felt in locations far-flung across the U.S., with stores in large cities such as San Antonio and Baltimore shuttering, as well as some in smaller towns like Macon, Georgia.
Lack of profitability is being cited as the main reason that these locations will face the axe in February. “This decision was not made lightly,” said Erin Conroy of Target. “We have a rigorous process in place to evaluate the performance of every store on an annual basis, closing or relocating underperforming locations as needed.”
Target Closing Stores List
- Eastland in Harper Woods, Michigan
- Hutchinson, Kansas
- Benton Harbor, Michigan
- Fergus Falls, Minnesota
- Hastings, Minnesota
- Macon, Georgia.
- Slidell, Louisiana
- Lauderhill, Florida.
- Matteson, Illinois.
- Romeoville, Illinois
- Baltimore West
- San Antonio Far East
These underperforming locations will probably only be the first instances of Target closing stores in 2018. With the way the industry is headed at the moment, it’s doubtful that they will be the last ones to shut down.
Negative Impact of Online Merchants like Amazon on Brick-and-Mortar Stores
Perhaps the biggest pressure facing the retail industry is the migration of consumers toward online purchases. Brick-and-mortar store closings have certainly been exacerbated by a lack of shoppers, who are choosing to spend their dollars online instead.
Online shopping vs. in-store shopping has long been discussed in the retail industry, with few companies finding a way around the problem. The 2017 retail trends, in fact, point toward Amazon gobbling up an even larger portion of the market, creating a deeper feeling of the Amazon effect. The recent announcement of Target closing stores in 2018 points to that effect.
Credit Suisse predicts that, by 2022, 25% of American malls will close, likely as a direct result of shoppers eschewing what was once a mainstay of consumerism.
And the situation is only likely to get worse. A new survey by the National Retail Federation shows that, for the first time ever, a majority of Americans plan to do their holiday shopping online. Even Black Friday, practically an American tradition—when malls and retailers can expect huge sales jumps—is under threat. Another study, by RetailMeNot Inc, shows that 54% of shoppers are likely to do their holiday buying before Black Friday.
A final nail in the coffin could be the growing share of the consumer market that Amazon has been taking. A recent Morgan Stanley report reveals that about 31% of all U.S. e-commerce purchases are done through Amazon. The Amazon effect is only growing, with the massive online company being predicted to drive half of all retail growth from 2016 to 2018.
More Retail Stores Expected to Close in 2018
With the trends going in the direction that they are, many are concerned about what the future will hold for the retail industry. Along with Target closing stores in 2018, there is worry that multiple retail chains will file bankruptcies.
Sears Holdings Corp (NASDAQ:SHLD) will be closing 63 stores across the U.S. next year, with more of them being Kmart locations (45). The upcoming Sears closings are not unlike the Target shutdowns, in that the locations will remain open through the holiday season.
“Sears Holdings continues its strategic assessment of the productivity of our Kmart and Sears store base and will continue to right size our store footprint in number and size,” said the company. “In the process, as previously announced we will continue to close some unprofitable stores as we transform our business model so that our physical store footprint and our digital capabilities match the needs and preferences of our members.”
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“Brick and Mortar Stores and the Amazon Effect,” The Corsair, November 1, 2017.
“Online shopping surpassing in-store retail this holiday season,” 12 News, November 7, 2017.
“One statistic shows how much Amazon could dominate the future of retail (AMZN),” Business Insider, November 1, 2017.
“Sears Holdings Store Closing List, Sears Holdings Corp, November 2, 2017.