2017 Will Be The Worst Year For US Retail In History

Tyler Durden's picture

Authored by Michael Snyder via The Economic Collapse blog,

Not even during the worst parts of the last recession did things ever get this bad for the U.S. retail industry. 

As you will see in this article, more than 300 retailers have already filed for bankruptcy in 2017, and it is being projected that a staggering 8,640 stores will close in America by the end of this calendar year.  That would shatter the old record by more than 20 percent.  Sadly, our ongoing retail apocalypse appears to only be in the early chapters.  One report recently estimated that up to 25 percent of all shopping malls in the country could shut down by 2022 due to the current woes of the retail industry.  And if the new financial crisis that is already hitting Europe starts spreading over here, the numbers that I just shared with you could ultimately turn out to be a whole lot worse.

I knew that a lot of retailers were filing for bankruptcy, but I had no idea that the grand total for this year was already in the hundreds.  According to CNN, the number of retail bankruptcies is now up 31 percent compared to the same time period last year…

Bankruptcies continue to pile up in the retail industry.

 

More than 300 retailers have filed for bankruptcy so far this year, according to data from BankruptcyData.com. That’s up 31% from the same time last year. Most of those filings were for small companies — the proverbial Mom & Pop store with a single location. But there are also plenty of household names on the list.

Yes, the growth of online retailers such as Amazon is fueling some of this, but the Internet has been around for several decades now.

So why are retail store closings and retail bankruptcies surging so dramatically all of a sudden?

Just a few days ago, another major victim of the retail apocalypse made headlines all over the nation when it filed for bankruptcy.  At one time Gymboree was absolutely thriving, but now it is in a desperate fight to survive

Children’s clothing chain Gymboree has filed for bankruptcy protection, aiming to slash its debts and close hundreds of stores amid crushing pressure on retailers.

 

Gymboree said it plans to remain in business but will close 375 to 450 of its 1,281 stores in filing for a Chapter 11 bankruptcy reorganization. Gymboree employs more than 11,000 people, including 10,500 hourly workers.

And in recent weeks other major retailers that were once very prosperous have also been forced to close stores and lay off staff

This hemorrhaging of retail jobs comes on the heels of last week’s mass layoffs at Hudson Bay Company, where employees from Saks Fifth Avenue and Lord & Taylor were among the 2,000 people laid off. The news of HBC layoffs came on the same day that Ascena, the parent company of brands like Ann Taylor, Lane Bryant, and Dress Barn, told investors it will be closing up to 650 stores (although it did not specify which brands will be affected just yet). Only two weeks ago, affordable luxury brand Michael Kors announced it too would close 125 stores to combat brand overexposure and plummeting sales.

In a lot of ways this reminds me of 2007.  The stock market was still performing very well, but the real economy was starting to come apart at the seams.

And without a doubt, the real economy is really hurting right now.  According to Business Insider, Moody’s is warning that 22 more major retailers may be forced to declare bankruptcy in the very near future…

Twenty-two retailers in Moody’s portfolio are in serious financial trouble that could lead to bankruptcy, according to a Moody’s note published on Wednesday. That’s 16% of the 148 companies in the financial firm’s retail group — eclipsing the level of seriously distressed retail companies that Moody’s reported during the Great Recession.

You can find the full list right here.  If this many major retailers are “distressed” now, what are things going to look like once the financial markets start crashing?

As thousands of stores close down all across the United States, this is going to put an incredible amount of stress on shopping mall owners.  In order to meet their financial obligations, those mall owners need tenants, but now the number of potential tenants is shrinking rapidly.

I have talked about dead malls before, but apparently what we have seen so far is nothing compared to what is coming.  The following comes from CNN

Store closings and even dead malls are nothing new, but things might be about to get a whole lot worse.

 

Between 20% and 25% of American malls will close within five years, according to a new report out this week from Credit Suisse. That kind of plunge would be unprecedented in the nation’s history.

I can’t even imagine what this country is going to look like if a quarter of our shopping malls shut down within the next five years.  Already, there are some parts of the U.S. that look like a third world nation.

And what is this going to do to employment?  Today, the retail industry employs millions upon millions of Americans, and those jobs could start disappearing very rapidly

The retail sales associate is one of the most popular jobs in the country, with roughly 4.5 million Americans filling the occupation. In May, the US Bureau of Labor Statistics released data that found that 7.5 million retail jobs might be replaced by technology. The World Economic Forum predicts 30 to 50 percent of retail jobs will be gone once struggling companies like Gymboree fully hop on the digital train. MarketWatch found that over the last year, the department store space bled 29,900 jobs, while general merchandising stores cut 15,700 positions. At this rate, one Florida columnist put it soberingly, “Half of all US retail jobs could vanish. Just as ATMs replaced many bank tellers, automated check-out stations are supplanting retail clerks.”

At this moment, the number of working age Americans that do not have a job is hovering near a record high.  So being able to at least get a job in the retail industry has been a real lifeline for many Americans, and now that lifeline may be in grave danger.

For those running our big corporations, losing these kinds of jobs is not a big deal.  In fact, many corporate executives would be quite happy to replace all of their U.S. employees with technology or with foreign workers.

But if the middle class is going to survive, we need an economy that produces good paying jobs.  Unfortunately, even poor paying retail jobs are starting to disappear now, and the future of the middle class is looking bleaker than it ever has before.

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yogibear's picture

Baby boomers have so much nice stuff they need to dump (never really used) millennials can enjoy at least a decade of almost free goods (furniture, tools,cars, appliances).

baddress's picture

Why do they keep getting this wrong and blamin Amazon for everything?

Online sales are only a small fraction of the problem.

The real problem is that nobody has any disposable cash to spend on anything! We're at the bare bones and can't even pay the bills!

All these stores sell the same low quality cheap chinese crap with a different "brand" label slapped on. Nobody has money to waste on that shit anymore! The country's full! Stop sending more piles of china garbage over here! We're drowning in it!

Dangerclose's picture

Holsum bread factory in neighborhood closed 3 years ago. What replaced it? A 24/7 storage facility. That is all I see them building these days! WTF is going on? We have indebted ourselves with buying junk we don't need with money we don't have and are now looking for a place to put it. How sad.

yogibear's picture

Baby boomers are stuffed with stuffed with goods that were never really used. Almost new.

kolanu's picture

Its not the baby boomers, they're downsizing if they haven't already. The ones with the houses full of cheap crap are the younger ones with kids. Go to a few garage sales and see what's really going on.

Dame Ednas Possum's picture

Look at the Amazon stock chart and the 20 fold increase since the start of the GFC and I think you'll realise why 'they keep getting this wrong'. 

Bezos loves nothing more than a bank account full of eyeballs.

 

LastLegion's picture

I feel a big part of the economic collapse is/was caused by Walmart.  They started the whole Chinese import business.  That and their business practice of telling the manufacturer how much they will pay for a product instead of the other way around.  This caused US manufacturers to meet the price of Chinese goods or not sell their products to Walmart.  For most, it was send jobs to China to meet the Walmart offer.  This just added to the economic misery.  Walmart is/was the retail cancer.

JuicedGamma's picture

Q: So why are retail store closings and retail bankruptcies surging so dramatically all of a sudden?
A: Obamacare

undertow1141's picture

You mean imposing an ever increasing healthcare 'tax' on people at gun point comes with negative spending consequences? Whoda thunk it!

Yen Cross's picture

 But---But those ---emerging markets [manufacturing ] numbers are so shitty?

 I've been posting the dec.lining euroarea numbers all week. [German numbers are dropping]  CPI-ZEW-PPI

. . . _ _ _ . . .'s picture

Short-term stragedies meet long-term comeuppance.

baddress's picture

Our family isn't going to be suckers anymore, we keep everything until it literally falls apart, then replace it with used when possible, or the best quality generic. Who's got money to throw away on stupid brand labels anymore? Only suckers give a shit about "brand lifestyle". I just want a damn tshirt that can last through the wash more than 5 times.

yogibear's picture

The way it used to be.

Although appliances made these days are junk. Made to last 7 years at the most.

Lucretius's picture

Ya, this Sept my washing machine will be 17yrs old, I purchased it USED, reconditioned when I bought my home. One of my better investments of $75.00! NEVER one problem, oh the good ole days of the lonely Maytag repairman... My last dryer, a lovely chocolate brown GE I bought at St. Vincent for $5.00, spent $30.00 to re-jet it for propane. Worked problem free for 12-15 yrs till gfriend got a "new" er one (slightly larger drum) from her Sis.  Plastic POS, now I use the line outside... bitch! Thank god and greyhound, bitch b gone!

 I don't get what guys and gals are complaining about... I don't like Bezos either, so I don't shop there. Same w/ Mal-wart, f'm, not on a bet!

 Quality still exists, be prepared to step up and pay for it  .  Nearly always worth it. Who in the hell would BUY old navy crap? Their tee shirts are so thin that they are see through when first purchased... how long do you THINK it's gonna last? Then there is the logo, how much do they pay you to advertise for them...idiots.

kolanu's picture

And it costs more to repair them than it does to get a new one. There's something really wrong with that picture.

neighsayer's picture

Or repair it yourself! I am going to repair a gaming headset, need to do some soldering. Got a look at toothpaste prices, trying out baking soda, may throw in some vinegar.

For clothing, considering air drying.

gregga777's picture

"For those running our big corporations, losing these kinds of jobs is not a big deal. In fact, many corporate executives would be quite happy to replace all of their U.S. employees with technology or with foreign workers."

Hmm, I wonder where those big CONporate bosses will be able to live without fearing for their lives? They also better hope that they keep their bodyguards and security details really happy. They'd also be advised to get around by MRAP to survive IEDs or by helicopters with flare and chaff dispensers to counter heat-seeking missiles. Not that I condone such violence. Just a suggestion for their benefits.

animalspirit's picture

Now you know why they are stockpiling land in Idaho. Also known as "apocolypse insurance": http://www.businessinsider.com/billionaire-doomsday-preppers-escape-plan...

Drop-Hammer's picture

Great.  Now try to defend it.  Without an army.  General Patton said that defensive fortifications were monuments to man's stupidity.

whatisthat's picture

I would observe the worst time for the specified retailers were the months or years of expansion of their unsustainable business models resulting in bankruptcy.

moorewasthebestbond's picture

"Yes, the growth of online retailers such as Amazon is fueling some of this, but the Internet has been around for several decades now."

 

Sage analysis from the daily doom porn guys!

syzygysus's picture

Pff, its seasonal...too warm or too cold. That's what the jobs number reports always say.

Faeriedust's picture

That's not all.  Those malls are built by construction companies (i.e. Real Estate Developers) that make their profits by designing and building malls, collecting the money from upper-middle-class naifs as "retirement investments".  Such investments will suddenly be revealed for the scams they are, as the malls fold, and no more money will be forthcoming for additional builds.  So you're talking the loss of a million or so construction jobs as well.

Refuse-Resist's picture

1 million? They have to go back.

neighsayer's picture

Even if no more malls are built, why wouldn't there be other construction going on? If the youth were given more opportunity to create businesses of their own (yes, including lemonade stands, use the honor system, let the children practice entrepeneurship, let them get some confidence in marketing and sales), maybe we'd see lots of new construction. Why not?

Last of the Middle Class's picture

You can't walk by a mall or large retailer with out seeing the large banner signs declaring "Obamacare destroyed America's retail market, Please help" errr, I mean "Big Sale" going on. You've taxed the goose to death guys, wake up and smell the carcass. Damn those senators and congressmen are stupid.

Bollockinell's picture

"Yes, the growth of online retailers such as Amazon is fueling some of this, but the Internet has been around for several decades now."

As far as the general public is concerned the internet has been around just over 2 decades, besides which, Amazon was not around all of this time. One thing this article overlooks is the time it took for buyers to become used to purchasing online. In the 90's most were scared stiff of giving out credit card details and with so many sites getting hacked, they had good reason to be! With major improvements in web site security, buying online has become the norm for masses of people.

It's not the same world today. Taking the car out to go shopping presents much more than just the risk of being involved in a potential accident. Online retailers are beginning to wise-up to the power of Amazon's A to Z guarantee which takes most of the risk out of buying items you cannot touch and try on. We were all warned numerous times about the tendancy towards coocooning and yet the brick and mortar store owners thought it would never have any consequence on their businesses.

Malls will have to be converted into entertainment centers or something that cannot be had online.

What we are witnessing is the Kodak story happening all over again only this time it's hitting 100's of 1000's worldwide.

SmallerGovNow2's picture

I think you're right.  I know personally I NEVER go to shopping malls anymore.  Amazon is too easy and so convenient to compare items and even to get the right sizes (once you know your size for a particular brand item).  I do almost ALL of my retail shopping online...

adr's picture

The problem is that you can't really make any money selling on Amazon. You almost have to sell your products there, but the hoops you jump through and the insane requirements nake it almost not worth it. 

You then become part of an algorithmic buying program that may order four units, or twenty. If you don't have the inventory, you get dropped. 

Then you have the MAP problem where algorithmic pricing programs automatically reduce prices to clear inventory. Which causes anyone else carrying your product to freak out. 

Amazon is the death of commerce, not its savior. 

Last of the Middle Class's picture

Just another sign of the middle class going "tits up" as democrats regurgitate gun control in the aftermath of a shooting where responsible gun stewardship saved many of thier own lives. Their narrative now is the croak of a dying social resistance class that years ago was meant to improve our lives, now is nothing but a banner for more socialism and more entitlements from the ultra wealthy donors.

InnVestuhrr's picture

Personal Datapoint: I have sold thousands of items on eBay, always with brisk demand, but since Jan eBay sales have been ZERO.

InnVestuhrr's picture

All the empty retail buildings will be converted into mosques in the coming islamic America.

Refuse-Resist's picture

Or SJW/WhiteLeft/communist re-education centers set up like boarding schools. There will be lots of time for our new students to concentrate on their education.

It will make them free.

 

 

yogibear's picture

The snowflake's and DNC's dream. Self-destruction.

Moe Howard's picture

Out with the old, in with the new!

I remain Entertained!

Drop-Hammer's picture

I am doing my part.  Have not bought sh*t.  Except for guns/ammo.

William Dorritt's picture

If the the Middle Class is erased, so are it's suppliers.......

Median Household is now taxed at 62%