Retail Bloodbath: Why So Many of the World's Largest Retailers Are Going Bankrupt

Patrick Antinozzi

The death of retail has been shouted from the rooftops for years. In fact, people starting making this bold proclamation the moment you were able to buy stuff online.

And that's exactly what everyone seems to have chosen as the reason for this retail apocalypse. Online shopping has apparently destroyed our beloved brick and mortar retail chains.

There's just one problem with that argument.

It's not true.

It's certainly the easy argument to make. Online shopping is massive and more accessible than ever before. Companies like Dominos, Facebook, Starbucks, and Amazon are regularly building new technologies with the sole purpose of making it painless to buy more stuff online.

So, while online shopping definitely has some of the blood of retail on its hands, (don't leave town, Online Shopping) it has merely played a part in retail's supposed death.

Here's several other reasons why major retailers everywhere are going belly up.

Viewed their size as a strength, when it was actually a weakness

Put simply, America built too many malls.

death of retail lie

via Cowen and Company

For decades, going to the mall was what you did as a kid. It was the local hangout spot. Shopping was entertainment.

Massive concrete complexes of hundreds of stores were slapped together, with several major tenants recruited to anchor the smaller ones.

So what happens when those big department stores start to fail?

Malls are retail bundles, and when bundles unravel, the collateral damage is massive. In retail, when anchor tenants like Macy’s fail, that means there are fewer Macy’s stragglers to amble over to American Eagle. Some stores have “co-tenancy” clauses in malls that give them the right to break the lease and leave if an anchor tenant closes its doors. The failure of one or more department stores can ultimately shutter an entire mall.

- The Atlantic

A massive domino effect.

Combine that with the fact that many of these malls are located in the suburbs while young people are flocking into the city in droves, and you've got a recipe for disaster.

Too slow to adapt to the changing landscape

The new retail is everywhere. Traditional brick and mortar still plays a role in that. It's simply now a piece of a large, omnichannel puzzle.

Omnichannel recognizes that today's consumer has a wide selection of channels to interact with businesses and brands, often simultaneously. For example, looking up reviews for a product online while playing with it in person at a retail store. Contacting a company via online chat while waiting to talk to their customer service rep on the phone. Posting an Instagram of a funny sign in a restaurant while waiting for their waiter to tend to them.

- Statflo (yep, we totally just quoted ourselves)

Your customers want to interact with your on their terms, not yours. 

The traditional retailers that are now going bankrupt are the ones that were too slow to adapt to this new, "retail everywhere" landscape.

A dramatic shift in culture from "things" to "experiences"

Millennials (and to an even greater extent, Generation Z) hold very different values than their ancestors.

While Baby Boomers and Generation X wanted nothing more than to own that cute home in the suburbs with the white picket fence and front lawn for the kids to play on, the new normal is exactly the opposite.

Young people aren't interested in buying a lot of things. They want experiences. Check out this graph of retail sales over the past 20 years to see what I mean:

death of retail lie

That big drop the blue line suffers is the 2008 financial collapse. When money got tight, the first thing people cut from their budgets was buying material possessions.

But what happened to that red line, the one signifying purchases of food and drink related retail? It kept on trucking.

And that "experience retail" has seen incredible growth since 2015, with no signs of slowing any time soon.

The retailers that managed to steer clear of the bloodbath are the ones that dramatically improved their customer experience, crafting it into something their customers would want to share with their friends.

After all, if it's not on Instagram, did it really happen?

Not so much a "bloodbath" after all

Yes, many retailers are closing stores and some are even being driven to bankruptcy. No, this does not mean retail is dying.

Many new retailers have popped up in the absence of these old relics, and are thriving in this challenging new retail environment.

While there are certainly external factors to blame, it's important to note that the companies shuttering a large quantity of stores are also victims of their own mistakes. For example, much of the trouble facing teen retailers is the fact that their target demographic no longer finds their product appealing. Instead, they've begun shopping at fast-fashion stores such as H&M and Zara—which, in contrast, are growing their U.S. square footage.

In a similar vein, department stores' woes are due, in part, to the fact that their overall share is shrinking. A few years ago, these big-box locations accounted for well over 10 percent of the retail market; now, it's about 3 percent, he said.

- CNBC (emphasis added by us)

The next few years will be an exciting time in retail. Forward thinking, progressive, and innovative retailers are coming up with some truly wild retail strategies and incredible technologies designed for a new age.

Where many see death, others see new life.

About the Author

Patrick Antinozzi

Patrick is our Content Specialist / Brand Ambassador / Internet Geek. He's got his finger on the pulse of business and retail trends, and loves writing in various corners of the internet. When he's not doing that, you'll find him traveling the world, playing hockey, or ranting about the Montreal Canadiens.

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