In the past couple of years, several past their prime retailers have filed for bankruptcy: Forever 21, Charlotte Russe, Toys R Us, Payless, Kmart, Gymboree, and Aeropostale have all fallen to the uprising of the “retail apocalypse” as its recently been referred to. In 2019, store closings amounted to 8,200 with 35 major bankruptcies declared and over 75% of them retail compared to 2017 with store closings of only 6,700.
The buzz has recently picked up the pace with Forever 21 filing for bankruptcy a few weeks ago, which they announced in a letter to their customers in an email and on their website. This sparked the discussion of the so called “retail apocalypse” that is sweeping the industry and will continue to as online spending increases and retailers in deep debt, struggle to change their fate.
For Forever 21, their debt is rough with a $1 to $10 assets to liabilities ratio. By why the sudden shift? People are still spending money- so what’s up?
The problem isn’t that people aren’t spending money, us consumers are just changing our preferences. Our shopping platform preferences, and our priorities.
With large retailers going out of business, shopping malls are struggling to fill spots as occupancy rates decrease. Larger department stores are harder to fill in malls and for Forever21, some of their stores span over 100,000 feet.
Forever 21 Shibuya in Tokyo, Japan
Forever 21 in Willow Grove Mall, PA
However, as daunting as the word apocalypse may seem, some see it as a solid strategic move. Zumiez announced that it would utilize some of its retail locations as fulfillment centers instead so that we, the consumers, can have our online orders processed faster, which is the holy grail structure of e-commerce giants like Amazon. The mass closing of traditional retail chains like Toys R Us and Payless, unfortunately represent those in retail who struggled to stay relevant and in step with advanced technology and consumer shopping trends.
With that being said, retail is still expected to rise especially in the ecommerce department. According to Kiplinger, sales are expected to increase by 4.3%. And in truth, our preferences as consumers are changing. Big retailers like the TJX Companies are thriving as we hunt for good deals from these struggling retailers. We consumers like the “hunt” that comes with searching for a well known brand of clothing at a lower price. It comes from our recent obsession with thrift and second hand shopping. Thredup, the popular online thrift store, reported that the resale market is expected to grow to $51 billion by 2023 as consumers become more environmentally conscious. The Association of Resale Professionals found that there are over 25,000 resale, consignment and nonprofit thrift stores in the United States. They also states that America’s Research Group, a consumer research firm found that 16-18% of Americans will shop at a thrift store and 12-15% in a consignment store (thrift stores versus consignment stores) while only 11.4% shop in malls, 19.6% in clothing retail stores and 21.3% in department stores. Second hand shopping is definitely catching up to the big guys. And with online second hand shops like Poshmark and ThredUP, consumers are taking advantage of recycling fashion on every platform.
So although traditional retail as we know it is slowly declining, many other retailers are keeping up with trends and staying afloat amidst the “retail apocalypse” and rise of online and second hand shopping.
Other retailers, like Forever 21 and Charlotte Russe, need to do some restructuring to better understand their consumers and how they can win them back.
From all of us here at Consumer Sense, watch out for major changes in your favorite retailer and keep on seeking out those great deals. Check back soon for more consumer tips and tricks to save money so that we can make sense of it all for you!