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The retail apocalypse continues to rip through America in 2021, threatening to shutter thousands of stores and lead to a new wave of bankruptcies. According to recent estimates, the number of store closings this year will rise above the figures seen in 2020, and roughly 1 in 4 U.S. malls might cease to exist as the consumer shift toward e-commerce accelerates the downfall of brick-and-mortar locations. At this point, more than 8,000 stores have permanently closed doors, and at least 1,000 more closures are expected to occur over the next few months. Moreover, as experts forecast that $100 billion in merchandise is going to be returned, the worse is yet to come for the sector, whose revenue has been dramatically and continuously plunging by the day. That’s what we’re going to expose in this video.
According to a recent UBS analysis, the U.S. is on the verge of losing 10,000 more stores this year. So far, retailers have confirmed more than 1000 store closures to occur in the next few months. The estimates for closings in 2021 stand considerably above the 8,000 store shutdowns registered in 2020. The report also outlined that considering the online shopping trend has sharply risen and will continue to do so, approximately one in every 11 stores will close in the next five years. The UBS analysts revealed that in the best-case scenario, the U.S. will lose almost 81,000 retail locations over that span, but in the most dire scenario, it could lose more than twice as many stores – almost 150,000 in total.
According to real estate data firm Green Street, foot traffic at malls has fallen about 30% from a year ago, which means brick-and-mortar revenue will remain compromised, and, more concerningly, according to a study from Coresight Research, approximately one-quarter of American malls will cease to exist in the next three-to-five years. Moody’s Analytics anticipates that nearly 135 million square feet of space at regional malls will become available during that time.
Shopping mall owners are having to face a debt mountain as tenants grow increasingly unable to afford rent. That, in turn, is rapidly aggravating the commercial real estate collapse, and the sector now has hundreds of billions in distressed loans. An updated list of store closures scheduled to occur in the next couple of months was just released by Business Insider. The list includes an additional 60 Disney store closures – a move that will affect 20% of Disney’s 300 global retail stores and lead to mass lay-offs.
But the company declined to say how many people will be impacted. In January alone, the retail apocalypse has already triggered four more bankruptcies, including women’s clothier Christopher & Banks. However, the main difference between this year and last year is that despite the forecast of higher rates of bankruptcy, store closings rate will be so staggering that will outnumber bankruptcy filings. The firm reported that “36% of retailers plan to eliminate their floor space as a means of cost optimization and 31% intend to reduce their mall-based locations”.
On top of all that, many industry specialists have been highlighting that the number of returns experienced by troubled retailers could become their tipping point toward bankruptcy. A survey from the National Retail Federation shows that consumers returned nearly $428 billion in merchandise last year, which accounts for 10.6% of total U.S. retail sales in 2020 as a whole. At this point, retailers anticipate that 13.3% of merchandise sold during the holiday shopping season – representing an estimated cost of $101 billion – will be returned. The profit losses and the recent supply chain disruptions are also expected to hit those that are struggling.
It is clear that the sector isn’t out of the woods yet. Instead, the U.S. retail apocalypse continues to be aggravated and to weigh upon the commercial real estate collapse. A new round of widespread closures and bankruptcy filings will also be translated into fewer jobs in an economy that already has 10 million unemployed people. Unfortunately, the long-awaited reopening will not mean a recovery is coming next. The truth is that we’re bound to enter an era of endless systemic failures, and you should keep tuned with the turn of events that are leading America to The Everything Collapse, here, on Epic Economist.
Economist website: https://www.epiceconomist.com”