Did You Know Retail Stores Are Losing Their Value?

By Ryan Velez

An outing at the mall used to be as American as you can get–spend a few hours shopping, check out some new clothes, then cap off your visit with a stop through the food court. However, as the retail industry starts to feel the squeeze, the mall has felt a bit out of date, and a recent article from The Network Journal looks to figure out why.

One thing that is clear is that retail bankruptcies are on track to hit a record level. Mall staple/teen apparel company rue21 Inc. filed for Chapter 11 bankruptcy reorganization last week. They now join the likes of Payless, American Apparel, Aeropostale, hhgregg, and The Limited. In fact, S&P Global Market Intelligence says that with the year not even half over, bankruptcies in early 2017 have come close to the total number in 2016. Many people put the blame on the rising popularity of online retailing, but consumer trends are also a major part. More and more people want to spend their money on a new piece of tech than a new jacket.

“It’s not new news that mall traffic is weak, but it continues to weaken,” said Christina Broni, vice president and senior analyst for Moody’s Investors Services. “Changing consumer behavior and e-commerce continue to weigh on performance.” The end result is that there are too many stores and not enough customers to use them all. However, each company’s story is different, and many are taking differing approaches to solving the same problem. Some are shutting down stores, while others, like Kohl’s, are focusing on reducing inventory and store sizes instead, trying to get increased productivity from what they have.

Charles Kessler, global brand president of American Eagle Outfitters said last week that store closures are the plan his company is looking to use, but the reasoning is more complex than simply not being able to keep them all open. “We’ve been experimenting with closures of stores where we are able to really track sales migration and really analyze the relationship of the stores to our digital business.” He does not that there is still value in brick-and-mortar stores, saying that they are “the best place for us to drive new customer acquisitions” and 80 percent of online returns are taken back to stores.”

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