Today’s news headlines scream the end of the retail industry as we know it. This “retail apocalypse” has been discussed so often that it is embraced as fact.
But is it true?
A new study from IHL Group on 1,660 U.S. retailers with 50+ locations suggests that the retail industry is not, in fact, dying. Instead, the industry has seen a net gain of 8,575 stores from 2017-2019.
Consider these facts from the study:
- Seven of nine retail segments are projected to have an increase in store counts in 2019 over the prior year. The only two segments that are projected to have a decrease in store count are department stores and specialty softgoods (apparel and shoes).
- The store closures are being driven by a small number of failing chains, rather than industry-wide struggles. Twenty companies account for 75% of all projected net closings in 2019.
- Retailers are growing more than they are closing stores. There are 2,965 more openings announced for 2019 than announced closings. As stated previously, the industry is projected to see a net gain of 8,575 stores for the period from 2017-2019.
- In the worst years of store closings (2017 and 2018), sales were still up. Retail sales grew $232 billion in 2017 and $36 billion in 2018. Amazon is just a fraction of the growth. Their sales grew approximately $29 billion in 2017.
- While the ratio of openings to closings has remained positive 2017-2019, the volumes do seem to be slowing. There are fewer openings and closings this year than in the prior two years, suggesting we may be reaching an equilibrium.
Thriving in Today’s Retail Environment
What we are witnessing is a classic business example of survival of the fittest. Retailers who have adapted to the new omnichannel environment and managed their finances well are thriving. Those who haven’t are dying. However, the number who have adapted greatly exceeds the number who have not.
Retail leadership teams need to double down on answering fundamental questions.
- Do you know who your customers are and where they are located? This knowledge is essential for competing in today’s environment. Without it, you are just guessing.
- Are you making thoughtful real estate investments? The stakes are high. Each store opening should be carefully evaluated using a combination of quantitative and qualitative tools. Each lease renewal should be similarly scrutinized to ensure the location is still a solid place to reach your target customers.
- Is your marketing as efficient as it could be? Reaching mass audiences may be good for branding but isn’t efficient for driving purchases. Household-level targeting of best potential customers is the key to maximizing marketing investment.
The Bottom Line
The retail industry isn’t struggling as much as you may think. Sound business management and a willingness to adapt to the changing environment are the keys to success.
If your company needs help addressing any of the fundamental questions above, we can help. Our retail analytics and technology are designed to help you make the right business decisions to position your company for success. Learn more.