According to a new Coresight Research report, retail store closures in 2019 have already exceeded the number we saw in all of 2018 - and we’re barely into the third quarter.
With the quick pace of stores shutting down, the total US store closures could exceed 12,000 by the end of the year. If that happens, that would more than double the number (5,864) from the previous year.
Retail store losses are happening across the industry and most research blames the carnage on the increase in online sales, particularly those on Amazon. While that’s likely a key culprit, are there more factors to consider when talking about why these outlets are failing?
Taking a holistic look as an industry professional, a key data point stands out to me. How many of these companies are vertical organizations that are manufacturing and supplying their own products? While companies move to this model to contain costs or take a bigger piece of the pie (Amazon has been doing this well in some categories), this change in business model also puts enormous pressure on the retailer to stay ahead of the game in consumer trends with no supplier partners to help shoulder that responsibility. This may not play to a retailer’s core competency, especially the need to sustain it over time without adding a lot of additional overhead.
Case in point: Dress Barn, a brand closing all stores by the end of the year, transitioned from buying national labels and selling them at a discount to being entirely vertical over a decade ago. This was done to make their brand more fashion-forward and, for a while, it succeeded. Yet, did this change make it harder for them to keep up with the changes in consumer tastes than if they had relied on supplier-partners whose expertise is in that space?
This isn’t limited to apparel. Pier One and The Container Store are also vertically-sourced retailers that have good brands but they are struggling right now. This has weighed on their stock prices, which could lead to similar outcomes.
What do you think about the use of private label products and their part in the success or failure of retail companies? Are there other factors at play besides online sales?