Stores Closing

It is hard enough to operate a retail store in the best of times. This year and next, when most potential customers want to stay home as much as possible, we may see the largest wave of store closings ever.

Already in the first eight months of the global pandemic, the retail picture isn’t pretty. Stores are operating with reduced hours and capacity, and in most categories, nearly every store is operating at a loss.

The grocery segment might be thriving as most consumers stop eating at restaurants and get nearly all their food from supermarkets. Home improvement and fitness equipment stores are holding their own as customers focus more on the home. There are categories in which retailers can simply raise prices, allowing them to weather any storm. In most categories, though, it has become almost impossible for a retailer to show a profit, and the situation will not improve until the number of stores declines.

I expect the largest number of store closings in apparel, shoes, and beauty. For customers who stay home more days than not, these products have lost half of their meaning.

To an extent, purchases not made in stores can be made online, but so far, that shift has been limited. Excluding food and drugs, only about one fourth of the decline in in-store purchases has been countered by an increase in online shopping.

There could be a wave of mall closings. Shopping malls depend so heavily on the now-irrelevant apparel space that they cannot possibly make up the shortfall in other categories. On the other hand, they may have enough access to credit to weather a three-year dry spell.

In addition to stores, there will be mass closings in cinema, restaurants, travel, and entertainment.

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