It’s being called the Retail Apocalypse by analysts as 2017 sees massive spikes in retail bankruptcies. Some are saying that the retail bubble has burst, and the fallout is happening now. Retailers across the country, including big name brands such as Payless, Gymboree, and Bebe, are shuttering locations, filing for bankruptcy protection, reorganizing, or liquidating. Online giants such as Amazon and big box stores like Target are swooping in to pick up where business has drooped. However, each sector is different and have been showing varying trends. Currently, Bloomberg ranks department stores as being at the highest risk of default, with electronics and apparel at second and third, respectively.
Here’s what’s happening in three top sectors for retail bankruptcies
1. Department Stores
Currently, many big name department stores such as J.C. Penney, Macy’s, and Sears haven’t officially filed for bankruptcy, but there have been hundreds of store closings across the country, and it only seems to be getting worse. Investopedia attributes much of this phenomenon to a shrinking middle class consumer base, the increasing popularity of online shopping, and brick and mortar businesses failing to attract mall foot traffic. The closing of department store locations also has a ripple effect over to apparel retailers that depend predominantly on the mall shopping experience to make sales, since department stores are traditionally anchor retailers in larger complexes.
Apparel chains are being hit hard across the country, with hundreds of stores closing or complete disappearances of brands that have been around for decades. USA Today reports that 19 companies, including Rue21 and Payless, both of which have filed for bankruptcy, have a combined $3.7 billion in debt. Other recognizable names include The Limited, Wet Seal, and BCBG Max Azria, now closed and a reflection of how badly brick and mortar retailers are in trouble. Experts predict that things will get worse before they get better as the industry tries to stabilize amidst the upheaval, and the roster of names is sure to grow.
Electronics retailers have been hit hard, too. RadioShack, much beleaguered by debt and having filed one bankruptcy in the last two years, has announced they plan to close 9 percent of their remaining stores as they file for their second bankruptcy. The retail economy is currently in a downturn, making it extremely difficult to stay afloat, especially if business has already been poor to begin with.
Overall, it’s a bad year for retailers, and they’ll need to come up with new ways to attract shoppers that don’t rely solely on foot traffic. With the dwindling popularity of a traditional mall shopping experience, many consumers are now doing most of their shopping online with the advantage of price comparison research, finding products for cheaper than in-store price tags, and the convenience of shipping to their own home. Brick and mortar retailers in all industries will need to be more forward thinking if they plan to survive the year. However, once the bubble has burst and the fallout finishes, there will be opportunity to reinvent brands and re-think approaches to the shopping experience customers want.