by Dan Rafter
This isn’t a great time for large, traditional retailers. Commercial brokerage Marcus & Millichap recently released its 2017 national retail report. That report said that non-traditional, service-based and value retailers — everything from dollar stores to nail salons to restaurants and adult-focused arcades — are continuing to grow.
Traditional clothing, department and electronics stores? They keep struggling, and many of them are closing hundreds of stores in 2017.
There’s an obvious reason for this: Consumers are increasingly buying clothings, books, electronics, outdoor apparel, hardware and music online. Many consumers prefer ordering these items from retailers such as Amazon and Zappos instead of traveling to brick-and-mortar stores.
Stu Wangard, chairman and chief executive officer of Milwaukee’s Wangard Partners, has seen this trend clearly.
Wangard said that Milwaukee’s retail market is seeing a bit of a rebirth. But it is a changing market.
The Milwaukee retail market is moving from large traditional department stores to smaller specialty stores, he said. Service businesses are on the rise, too, everything from fitness clubs to nail salons.
The retailers that are thriving? Those that are offering products and services that customers can’t simply order from a Web page.
“It’s obvious who the winners are and those who are going through downsizing,” Wangard said. “In each category, there is a winner. Those dominant winners are adding square footage at the right spot and the right size.”
The National Retail Federation reported that February retail sales across the country grew 0.8 percent when compared to the same month one year earlier. Online sales, though, saw a bigger jump, with the federation reporing that online and other non-store sales jumped a much healthier 8.2 percent this February when compared with 12 months earlier.
Meanwhile, sales at clothing and accessories stores fell 1.1 percent this February when compared to the same month in 2016. Sales at general merchandise stores fell 1.4 percent during the same time period, and electronics and appliance retailers saw the biggest fall, their sales dropping 9.8 percent this February when compared to the same month one year earlier.
Jack Kleinhenz, chief economist with the National Retail Federation, described consumer spending in the first half of this year as “erratic and most often weak.”
Again, service businesses, including restaurants, are bucking this trend. Daniel Ortega, a vice president with Colliers International, highlights this when he estimates that food-related spaces take up 25 percent to 30 percent more square footage in retail centers today than they did 10 years ago.
And don’t expect this trend to lessen. The National Restaurant Association said that 2016 ranked as the seventh consecutive year of growth in restaurant-business sales. The association said restaurant industry sales hit $783 billion last year.
So, what retailers are struggling? There are many, and, as is to be expected, most of them fit into the traditional large-scale retail mode.
Here is a list of the five retail giants that are struggling the most in 2017:
J.C. Penney: This veteran big-name retailer is hemorrhaging stores. The company recently announced that it was closing 138 under-performing stores across the country.
In a written statement, the company’s chief executive officer, Marvin Ellison, said that the closures are a step in helping to rejuvenate the department store chain.
“We believe closing stores will allow us to adjust our business to effectively compete against the growing threat of online retailers,” Ellison said.
Sears Holdings: It seems as if Sears has been struggling forever. This year looks to be especially bleak for the once-dominant retailer. Sears — along with Kmart — will close 150 stores this year. This comes after the chains shuttered 130 locations in 2016.
Radio Shack: The electronics retailer filed for bankruptcy protection in 2015. It did the same earlier this year. Radio Schack also announced that it is closing 552 more stores across the country. That comes out to 36 percent of its locations.
Many of the retailer’s closings are in the Midwest states of Illinois, Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Missouri, Nebraska, Ohio, Tennessee and Wisconsin.
Macy’s: It’s difficult to picture Thanksgiving without the annual Macy’s parade. But the department store chain has long been struggling, and this trend doesn’t appear ready to slow in 2017. Analysts say that Amazon, of course, has hurt this chain. But so have value chains such as T.J. Maxx.
The chain also posted weak holiday sales in 2016, its sales in November and December of last year falling 2.1 percent. It’s little surprise, then, that Macy’s plans to close 100 stores this year.
hhgregg: Online sales haven’t been kind to electronics retailers. hhgregg — which sells electronics and appliances — is a good example. The chain will close 88 stores this year and filed for Chapter 11 bankruptcy protection earlier in 2017.
“We’ve given it a valiant effort over the past 12 months,” chief executive officer Robert Riesbeck said in a written statement. “We have conducted an extensive review of alternatives and believe pursuing a restructuring through Chapter 11 is the best path forward.”