The year that is about to end has been particularly highlighted by the ‘Retail Apocalypse’ that our country has been going through. With the increase in online purchases, virtual purchases are becoming the norm, and, with it, the reduction of personnel. Maybe it is not a temporary situation but this crisis will advance much more strongly during the next year because the way in which trade is being transformed in our country and the whole world is final.
Big brands such as The Limited, Wet Seal, and RadioShack have announced hundreds of closures in the face of the catastrophic Christmas campaign and the steady decline in sales. Closures that leave orphans hundreds of shopping centers that are articulated around their anchor’s stores for the ability to attract customers and condemn them to the disappearance.
The sector itself speaks of a bubble prick. The CEO of Urban Outfitters, Richard Hayne, one of the affected clothing brands, does not hide that during these years too many large surfaces were built, a bubble, just like in the house and has just burst, he said.
The US media has coined the term ‘Retail Apocalypse’ to explain the crisis in the retail sector that affects even luxury brands such as Ralph Lauren. E-commerce has revealed a deep structural problem of physical trade which is reflected in the sales pace of the leaders in each segment. The growth of sales of Amazon in the last six years multiplied by three to those of the Sears chain.
As for the latter, the fall of this important retailer really confirms the difficult moment that the American retail trade will live in the coming years. The happy history of Sears dates back to the late 1990s when this department store had managed to position itself as the largest retailer in the world with sales of close to 200 million dollars per quarter, even the retail giant had even given its name the highest skyscraper on the planet.
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However, the reality is different nowadays. During the last six fiscal periods, Sears has accumulated losses of more than ten billion dollars, its shares have retreated ninety percent in five years, and its market capitalization has fallen below the 850 million. In addition, the Sears crisis is also reflected in the layoffs of nearly ten thousand employees, the sale of its brand of Craftsman tools for almost a billion dollars, and the closure of 150 branches of the Sears and K-mart brands in the world. These actions have been the floats of Sears, but the effort is still insufficient.
What began as a problem for electronics, music and books establishments has moved to textiles. Clothing stores have fallen under the pressure of large textile groups and new Internet competitors such as Warby Parker. Almost half of the shopping centers in the United States suffer from problems due both to the drop in the number of customers and the sales that can lead to a large part of these closing in the coming years. It is no surprise that this becomes an alarming situation with global repercussions since forty-five percent of shopping centers register weak sales and suffer a decline in the level of occupancy every month. Malls are getting empty and even closing around the country, and even abroad.
When it comes to the ‘Amazon problem,’ there are some things to say. The United States has too many stores, at a time when consumers are increasingly shopping online than in shopping centers. In addition, the ease that Amazon has to produce, distribute, and take advantage of electronic commerce to expand its markets, so got have a time-bomb here.
This phenomenon is not difficult to understand, really. The physical stores are in extinction all over the country because companies like Amazon or Alibaba (the kings of e-commerce) do things in a much more effective way. First, people spend more time on the Internet than in “real life” nowadays. The advertising that people see is personalized, depending on their searches and behavior online. These ads take users to sites like Amazon and show them what they want to buy (and the algorithms even seem to know people better than they know themselves.) Second, people do not have to drive anywhere. You need to buy a kitchen table, and all you have to do is taking your smartphone out of your pocket and check different catalogs. A consumer can investigate hours and hours to know exactly what he/she wants. Then he/she will purchase it after a couple of clicks, and the kitchen table will reach his/her home without moving a finger. It happens with books, clothes, food, movies, etc.; precisely, everything that you find in a mall. Additionally, consumers are more precise when buying. They no longer go to the mall to buy that little table with two seats, and, while doing so, buying an ice cream and some beautiful 75% off shoes. That does not happen in electronic commerce (or, at least, not in that way!)
Also, people do not want to consume things anymore. The new generations, a little more pessimistic about the future, prefer to pay for experiences. That is the question.
Maybe this is just the beginning of something bigger.
* Featured Image courtesy of Pixabay at Pexels.com