Are we in a Retail Renaissance, or a Retail Apocalypse?

Are we actually in the midst of a Retail Renaissance, and not a Retail Apocalypse?

As an Investment Sales specialist who focuses on the Retail sector, I keep a pulse on macro trends in our industry. We have all heard the news about how retail is dying, and certain chains are declaring bankruptcy.

While there certainly is bad news in retail, there is also good news. But we just don’t often hear about it.

In fact, IHL Group, a Think Tank that focuses on the retail industry, thinks we are in in a Retail Renaissance, and not a Retail Apocalypse!

They conclude that more stores are opening than ever – in fact, in 2019, there will be almost 3,000 more openings than closings, and for every chain that has a net closing of stores, 5.2 chains will have a net opening of stores.

How could this be, when all you read about in the news is doom and gloom for the retail industry?

First, they point out that news web sites are in the business of selling clicks. And bad news gets 10x the clicks of good news. Not only that, 80% of people only read the headlines. For example, you may have heard that Starbucks is closing 150 stores in 2019 which is 3x their average number of annual closings. But what the articles may not say is that Starbucks is opening 2,100 stores this year! That’s more than 10 times as many as the number of stores closing. But we don’t often hear that news.

StoreThe strongest areas of growth are:

  • Mass merchants and dollar stores
  • Drug and cosmetics stores
  • Convenience stores and gas stations
  • Restaurants, including fast food

On the other hand, there are areas that are weak or underperforming. Store types that are suffering are department stores and soft goods stores, which sell clothing and shoes, and regional malls.

They say that we are having a RETAILER problem, not a RETAIL problem. Individual retailers are declaring bankruptcy and closing stores primarily due to:

  • Short sighted private equity that added too much debt which retailers were unable to pay back (Example: Toys “R” Us)
  • Overexpansion due to inexpensive loans
  • Lack of innovation, customer focus and attention to changing trends (Example: the recent announcement of GameStop closing 150 stores, as they struggle to compete with online gaming)

When should we start to be careful about the near future of the retail industry, and the economy in general? The researchers say is the canary in the coal mine, and that is what happens with restaurants. Funds spent on eating out continue to grow from 2018 to 2019, which is a strong indicator of the economy and retail sector. Once people start cutting back on eating out, we need to be cautious about retail and the economy in general.

This was in-depth research which definitely puts our industry in a different, more positive light. If you’re interested, please check out their report at this web site, or contact me and I can get a copy to you.

Thanks for reading this far! I am an Investment Sales specialist focused on the Retail sector in the Inland Empire of Southern California. I like my clients to be aware of what’s happening in their immediate trade area, the greater region, and nationwide, which is why I send out newsletters like this. I have found that my expertise in this market helps me achieve maximum value for my clients’ listings, and I welcome the opportunity to help you to achieve your goals.

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Mike Lin, CRE