Gunnebo Business Solutions

The demise of Major Retail Chains in the US

The number of retail chain stores closing over the past few years has dramatically increased. Yet, as of 2019, large stores announced the closing of almost 7000 stores. This is comparatively more than 2018 where 5000 stores shut down. If this continues, it could be the retail apocalypse. 

Store closing sign on business store front.

The sole reason behind this rapid closing of traditional stores is the rise of e-commerce outlets where traditional stores are no longer an attention- grabber. As mentioned in the previous article, online sellers like Amazon have made it really difficult for stores to withstand in this digital era.

Most of these stores have begun changing their sales strategies particularly focussing on digital marketing. Thus, they have now moved from brick and mortar stores to e-commerce sites. The trend these days is to do purchases online. This saves time and money for needing to visit stores. Buying products online is a more convenient method.

Apart from that, bankruptcy is another major concern because of private-equity firms like what happened to Toys R Us. Most of these private-equity companies are more likely to go bankrupt than public companies. Although these companies express that they can help to grow capital, they are silent about debt and leverage buyouts.

What happened to American Apparel?

American apparel was a major selling store since its launch in 1997. It faced a lot of sexual harassment and defamation issues costing the company $3 million as fines. In 2017, facing bankruptcy for the second time, they had to close most of their stores.

It was purchased by Gildan Activewear by the end of 2017 for $88 million. The major change is that sexual images are no longer there. The new American Apparel emphasizes more on materials and pricing to attract customers.

Toys R Us: the kids’ dream store

Toys R Us has been around for 70 years and was every child’s dream store. This company faced its doom when taken by a private equity firm in 2005. It faced an unsustainable debt and filed bankruptcy in 2017.  

April 20, 2018 San Mateo / CA / USA - Toys R Us logo and "Going out of business" announcement above the entrance to one of the locations in San Francisco bay area; customers going into the store

This decision was taken as suppliers pressurized and they liquidated remaining stores. They had to close almost 700 stores of theirs and sold the rest to Canada. Many say there might be a comeback but Toys R Us will be a fond memory for many.

Victoria’s Secret – A girl’s best friend

Parent company L Brands announced closing almost 53 Victoria’s Secret stores in 2019. They even did close 30 stores in 2018 due to bad sales. One reason was the controversial comments that the chief marketing officer spoke of transgender and plus size. 

Panoramic view of a Victoria's Secret store front

This incident outraged many and led to a reduction in sales. Apart from that, many people claim that the quality of products has dropped as well.

Abercrombie and Fitch – new  toned-down version

Abercrombie and Fitch have planned to close almost 40 stores in the USA this year 2019. They have made plans to change their marketing strategies and be more sales-oriented. Getting rid of sexual ads was another point of focus. 

They have also mentioned opening 3 flagship stores redesigning others as a part of the restructuring. Moreover, The change of infrastructure in which they have moved from dark tones to a more bright and light atmosphere is a key highlight.

GAP – shutting down rapidly

One of the most famous brands, GAP is closing doors of almost 700 stores worldwide. Its sister stores like the Banana Republic are struggling to survive as they are not performing well. 

August 20, 2019 Palo Alto / CA / USA - Gap store in Stanford Shopping Center in San Francisco bay area

They are planning to split into two and have decided to change business models to increase profit. The Old Navy will go on a separate way. This is another marketing strategy as well to increase sales.

Payless- bankruptcy victim

A few years back, Payless went into bankruptcy for the second time. Now it is finally closing doors in 2019. They are planning to close almost 2300 stores within the USA. One reason was that the shoe store only has physical stores and with the increase in online sales, store sales have gone down. 

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On the other hand, Just like Toys R us, private equity buyouts are very hard to bear due to an extensive amount of debt. They also began liquidation sales which went until June 2019.

Michael Kors: Restructuring

Michael Kors closed almost 100 stores in 2017. This year they will be shutting 50 stores and have stated that there could be more. This is because of the low sales that the company encountered. It has also faced great difficulty to focus on average buyers being a luxury brand. However, they have partnered with Amazon and have moved to online sales which is a positive movement.

View at Michael Kors shop. Michael Kors  is a New York City-based fashion designer widely known for designing classic American sportswear for women.

Claire’s –  The Accessory Chest overcomes Bankruptcy 

Claire’s is a very popular store for teens with an extensive amount of accessories.  However, Claire’s also sought Chapter 11 protection due to bankruptcy. It, however, eliminated its debt of $1.9 million. They also underwent restructuring and eliminated about 2000 locations. 

Gymboree – Children’s clothing 

Gymboree was another victim of bankruptcy and sought for protection under chapter 11. It was another store that was dependant on brick and mortar. It faced a lot of loss in sales that made the company face debt. It has planned to close all Gymboree and Crazy 8 stores within the US and Canada which is about 900 stores in total.

J.C. Penny – 116-year-old outlet

J.C. Penny closed about 130 stores back in 2017 due to a dip in sales and has also decided to close 18 more stores. This Giant retailer was forced to close their shops because they have been losing a huge amount of money, due to a reduction in sales. At the moment, it is a broke company and stores are out of date. There are assumptions that they have been planning to open some toy shops at their brick and mortar stores.

August 14, 2019 San Jose / CA / USA - JCPenney department store located in a mall in South San Francisco bay area

Conclusion

The list of retail stores calling it quits can go on and on. It is almost like a global epidemic that infests to every retail chain and shuts it down. The list mentioned here is just a few of them. More and more companies are facing issues either due to bankruptcy or lack of sales because of online purchases. Yet, some stores like Gucci, Luis Vuitton and Claire’s have risen from this problem and have adapted new marketing strategies.

We are living in a new world, with new channels and if you want to know how to make your retail business ready for the future, please reach out to me: bjorn.nostdahl@gunnebo.com

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