Retail landscape continues to evolve
Papyrus, Express, Pier 1 store closures likely just beginning
The 10,800 stores closed by retailers last year wasn’t enough: just one month into 2020, they have announced plans to close 1,000 more.
“It’s sad, there are a lot of things closing,” said Patti Maher, 57, of Orland Park, browsing liquidation sales at Papyrus’s Water Tower Place store Wednesday. The greeting card chain is closing all 254 stores after seeking bankruptcy protection in mid-January.
Maher blamed shoppers’ growing reliance on Amazon, saying she still prefers shopping in stores.
“I try to support the little guys, not just big companies,” she said.
The news looks grim for bricks-and-mortar stores. But industry experts say it’s more of an evolution than a “retail apocalypse,” and Amazon and Walmart aren’t the only culprits.
Consumers are still spending: Shoppers shelled out $730.2 billion during the 2019 holiday season, according to the National Retail Federation. That’s up 4.1% compared with the same period in 2018. About $167.8 billion of that was spent online, where sales rose 14.6%.
Amid all the closures, retailers have announced plans to open 1,718 stores this year, according to Coresight Research.
Still, with more competition than ever for those dollars, retailers that failed to keep up with changes in the way customers shop or opened too many stores will continue to shrink, industry experts said.
Part of the problem is the U.S. has more stores than it needs, given the popularity of online shopping, said Craig Johnson, president of retail consulting firm Customer Growth Partners.
“There are too many retail square feet chasing too few customer square feet,” Johnson said.
Home furnishings retailer Pier 1 Imports led the way among retailers that announced store closures in January, with up to 450 locations affected, or about half its stores.
Consumer spending on home furnishings has been strong. But that’s attracted a lot of new rivals, like online furniture seller Wayfair, HomeGoods and brands doing better with younger consumers, like West Elm, he said.
Bed Bath & Beyond, which said in late January it has closed or plans to close 40 stores, including three in
Illinois, is another home chain getting its “clock cleaned by Amazon and Wayfair,” Johnson said.
There aren’t many items customers can find at Bed Bath & Beyond that they can’t get at other chains, he said.
Mara Glad, who was recently checking out a store closing sale at Pier 1 in Chicago’s Goose Island neighborhood, said she likes the retailer but rarely makes a special trip, instead turning to Amazon and Wayfair.
As the parent of a 4-yearold and 2-year-old, “it’s just easier,” said Glad, 38, of Roscoe Village.
She’s not alone, said Candace Corlett, president of WSL Strategic Retail. When it comes to nonessential shopping trips, like buying clothes for a new season, picking out holiday gifts or meeting friends to shop, between 32% and 38% of shoppers her firm surveyed last fall said they aren’t going to stores as often — or no longer go to stores for those reasons at all.
Instead, they’re choosing to spend money on things that make life easier, whether that means outsourcing errands to services like Instacart or enjoying experiences like dining out or a facial and massage, Corlett said.
“The goal is to create calm,” she said.
Many of the retailers closing shop in recent years have been department stores and specialty apparel retailers found at the mall.
Express said in January it would close 31 stores this year, including two in the Chicago area, and 35 more next year. Macy’s has invested in upgrading its stronger stores but said this year it would close 28, including one in West Dundee, and J.C. Penney is closing six.
That’s on top of previously announced closures at chains like Sears, which said last year it plans to close 96 Sears and Kmart stores in February, and Gap, which has said it would close 230 stores over the next two years.
All those announcements add up to more than 1,000 stores slated to close, according to real estate research firm CoStar.
“You have a perfect storm where the (retail) landscape changed at the same time a lot of apparel retailers found themselves oversupplied and in too-big spaces,” said Brandon Svec, a CoStar consultant.
Closing or downsizing stores can help retailers get to a more sustainable size. But some still struggle to give shoppers reasons to come back, whether that’s value, convenience or products and experiences they can’t find elsewhere, analysts said.
Department stores used to be destinations because they offered a wide range of goods in one place, but they’ve been losing customers as discount and off-price retailers and specialty stores have expanded, said David Swartz, an analyst in the consumer sector at Morningstar.
T.J. Maxx, Marshalls and Ross, for instance, added 24, 34 and 90 stores in the U.S., respectively, during the 12 months ending Nov. 2. Activewear brand Lululemon added 19 U.S. stores during the same period.
“The retailers doing better are the ones giving people a reason to go into stores,” he said.
There’s also the challenge of keeping up with shoppers’ ever-shifting tastes and values.
Express, for instance, used to be a destination for “going out, party” apparel, but shoppers are now gravitating to more casual looks, Johnson said.
Once wardrobe musthaves, Gap and J. Crew also have struggled to keep consumers paying attention, though J. Crew’s Madewell brand has fared better. Even Forever 21, a onetime darling of the “fast fashion” trend, is gasping for air. The company filed for bankruptcy in October and said it would shutter 200 stores, including its now-closed Michigan Avenue and State Street locations.
“When the consumers think (certain stores and brands) are hot, it’s hard to maintain that,” said David Weiss, a partner at Chicagobased consulting firm Mc-MillanDoolittle.
Cultural changes matter, too, experts say. Lingerie brand Victoria’s Secret closed 53 stores last year and canceled its annual televised fashion show, which has generated controversy in recent years for the way it portrayed women.
The show was an important part of building the brand, but “we’re figuring out how to advance the positioning of the brand and best communicate that to customers,” Stuart Burgdoerfer, chief financial officer of Victoria’s Secret parent company L Brands, said during a call with analysts in November.
Meanwhile, competitor Aerie for American Eagle — with ads that include women of various shapes, sizes, colors and abilities — is growing as it capitalizes on the #metoo zeitgeist. Sales at Aerie stores open at least a year were up 20% in the most recent quarter, the brand’s 20th consecutive quarter of growth, according to parent company American Eagle Outfitters.
“Body positivity is popping out everywhere and Aerie is the frontrunner,” Weiss said.
Papyrus, too, missed the mark by failing to keep in touch with consumers, said WSL/Strategic Retail’s Corlett. As card prices went up, consumers lost interest, she said.
“Retail stores have to really stay in touch with people — they have to acknowledge the shifting social values,” she said. “The customer mindset is ‘If it doesn’t apply to me,’ you’re already disappointing them.”