Joan Verdon / The Columbus Dispatch – The experts who keep track of store openings and closings have been forecasting for more than a decade that the day was coming when American retailers would have to pay for building far too many stores.
That day of reckoning, some say, has arrived, with one retail watcher predicting a “tsunami” of store closings this year.
That prediction, by Brian Sozzi of Belus Capital Advisors in New York, was made in January. Then, last week, Radio Shack announced that it is closing as many as 1,100 of its stores, and Staples said it is shutting 225 of its locations.
Even retailers that recently have been in expansion mode are trimming their store counts. Teen retailer Aeropostale plans to close 175 stores in coming years. The Children’s Place, while continuing to open stores, will shutter 125 of its weakest shops by 2016.
Some of the closings are driven by weak performance. That’s the case for Radio Shack, which has struggled to find its niche in the modern electronics world as it approaches its 100th birthday.
But in other cases, closings are being announced by retailers such as Staples that have decided that, in the Internet age, market dominance will not be achieved by building more bricks-and-mortar stores.
“It’s partially a function of the economy that hasn’t been that great, and consumers aren’t spending the way they used to, combined with retailers really just retooling their strategy,” said Glenn Brill, managing director at FTI Real Estate Solutions, a New York-based consulting firm.
In the past, Brill said, it was common for retailers to want to saturate a market to prevent competitors from moving in. “Those days are over,” he said.
Shopper visits to stores were down about 15 percent during the November and December holiday season, and online purchases are growing at nearly the same pace, so retailers are trying to figure out how many stores they really need and how big they should be.
Alison Paul, a retail and distribution expert for the consulting firm Deloitte, said in January that she expects the coming shake-up will be the biggest change the retail industry has seen since the 1960s, when the era of big-box stores began.
Jeff Green, president of Jeff Green Partners, a real-estate consulting firm in Arizona, said: “ If bricks-and-mortar retailers don’t really address how to make their stores an experience — like Apple, like H&M — then they run the risk of becoming outmoded.”
Talk of America having too many stores is not new, Green said, but the huge growth of online shopping is forcing retailers to address the problem.
“As so many office products and consumer electronics are bought over the Web, the office-supply superstore doesn’t need to be as large as it was, and there don’t need to be as many stores,” he said.
“The closing of Staples is symptomatic of trouble in big-box retail in general,” FTI’s Brill said, as the items that filled the superstores now can be found by surfing the Web rather than browsing the aisles of giant stores. “Look at an older Best Buy store,” he said. “They had a racetrack in the middle, like an oval, and everything that was in that oval — CDs, software, video games — all of that is Amazon material. People don’t care where they buy it, as long as they can get it for the lowest price.”
The Internet, Brill said, allows consumers to window-shop at dozens of stores and use shopping sites that compare prices and products. “It’s tough to compete with that,” he said.
The long list of retailers that have gone out of business includes Circuit City, Linens ’N Things and Borders. Those that have closed stores include Office Depot and A&P, said Ray Cirz, chairman of Integra, the country’s largest commercial real-estate appraisal firm.
The shopping centers most at risk from a flood of store closings, Cirz said, are power centers — the name for shopping centers that are a collection of stand-alone big-box stores. Supermarket-anchored neighborhood centers are less-threatened, he said, because they tend to have tenants such as hair salons and dry cleaners, which have no Internet substitutes.