As thousands of stores re-open, consumers are being greeted by a re-shaped retail landscape.

One thing is for sure, there will be fewer places to shop. Retailers are moving quickly to shed underperforming locations, renegotiate leases and shrink floor space. And this is occurring as UBS is forecasting that 100,000 stores could close in the U.S. in the next five years. And that’s coming as many non-essential stores in the UK prepare to re-open today (June 15), including Primark, which has 153 locations in the UK.

Radical Restructuring
The radical restructuring of retail will have an immediate impact – there is expected to be deep discounting this summer and fall as retailers clear seasonal inventory – and likely linger for years.  Many suppliers we polled aren’t expecting a return to “normal” until spring 2021. And most expect retailers to increasingly expand their ecommerce business.

“I can certainly see [in the short-term] an order for 10,000 t-shirts half way through the production process being turned into an order for 5,000 and retailers asking if we can hold the fabric and deal with that later because they are closing stores,” says an executive at a major licensee in Europe. “We are anticipating the need to have that kind of flexibility.”

Among developments last week:

• Store Closings. Inditex, parent company of Zara and other retailers, said it will close 1,200 of its 7,417 stores during the next few years, including 100 in the U.S. and a much larger number in Europe and Asia. At the same, Inditex plans to open 150 stores this year that feature better integration of its online and bricks-and-mortar business, part of a move to focus its physical business on fewer but more productive stores. Meanwhile, GameStop, which has shut 181 stores globally so far this year, increased its forecast closings for the year to 420 from 320. Children’s Place said it would shut 300 of its 920 stores by late 2021. And Retail Tailwinds, which operates New York & Co. apparel stores, said it would close more than 150 of its 387 stores — or all of them if it files for bankruptcy in seeking to become a “digitally dominant retailer.”
• The online shift. With so many stores having been closed for weeks save for those selling essential products, not surprisingly retailers’ ecommerce business is booming. And it’s growth that is expected to continue long after physical stores re-open. Ecommerce is expected to jump to a quarter of U.S. retail sales during the next five years, up from 15% in 2019, according to UBS. For example, Inditex expects ecommerce to account for 25% of revenue by 2022, up from 14% in 2019. GameStop’s ecommerce business surged 519% from a year earlier in Q1 ended May 2. Crafts retailer Michaels Companies, which last year was branded a “tech laggard” by Fortune, shifted quickly during the pandemic as online sales jumped 300% in Q1.
• Mall Battles. Mall operators, already struggling to collect rent from retail tenants, also squared off against each other. Simon Property Group terminated a proposed $3.6 billion purchase of Taubman Centers and sued its rival, claiming it didn’t take measures to mitigate the impact of the pandemic. Meanwhile, CBL & Associates, which owns 108 properties, issued a “going concern” statement after missing an $11.3 million interest payment and reported it had received only 27% of rent in April and expected only 25-30% of rents for May. About 60% of retailers reported they couldn’t pay April rent according to the research firm JLL, which forecast retail vacancy rates to hit 5.7% in 2021, and not return to pre-pandemic levels until 2024.
• Out of crisis comes opportunity. Acquisitive Authentic Brands Group (ABG), which within the past several months purchased Forever 21 and Barney’s New York out of bankruptcy, is back on the hunt. And that’s as it announces that it has licensed IB Group and Grupo Cojab for Forever 21 in Mexico where it will start with 37 existing locations.