March 8, 2014 in Business

Flood of store closings predicted for U.S. retailers

Joan Verdon McClatchy-Tribune
 

HACKENSACK, N.J. – 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 way too many stores.

That day of reckoning, some say, has arrived.

RadioShack announced this week that it was closing up to 1,100 of its stores, and Staples said Thursday it was shutting 225 of its locations.

Even retailers that recently have been in expansion mode are trimming their store counts. Teen retailer Aeropostale is planning 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, such as RadioShack, 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 brick-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.

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.

Alison Paul, a retail and distribution expert at consulting firm Deloitte, said 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.

“If brick-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,” said Jeff Green, president of Arizona-based retail real estate consulting firm Jeff Green Partners.

The shopping centers most at risk from a flood of store closings, said Ray Cirz, chairman of Integra, the country’s largest commercial real estate appraisal firm, are power centers – the name for shopping centers that are a collection of standalone big-box stores. Supermarket-anchored neighborhood centers are less threatened, he said, because they tend to have tenants like hair salons and dry cleaners, where there are no Internet substitutes.


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