75.000 physical stores will disappear before 2025: The retail crisis in United States
United States has seen a negative net balance (taking openings and closings into account) of 7.000 of its stores in 2017 and another 5.500 in 2018. The trend in 2019 slowed down thanks to the government tax incentives, but according to an analysis done by the Swiss bank UBS, when these tax breaks disappear and online sales begin to rise, the change will be even more abrupt: By 2025 75.000 more stores will have to close, this is the equivalent of one out of every two hypermarkets, supermarkets and grocery stores in all the country.
Amazon is to blame: UBS blames Amazon and its growing penetration. Today 16% of total purchases are made online, and the bank estimates it will reach 25% within the next six years. Consequently, 21.000 clothing stores (17% of all the stores in US), 10.000 electronic stores, 8.000 furniture stores and 1.000 bazaars, as well as many other businesses of different nature will disappear. Although only 2% of todays food purchases are made online, analysts warn that “when they reach quotas close to 4%” this will be a “notable incidence” and if these percentages rise to 10%, the effects could be insurmountable.
United States is not Spain:
These two countries have very different markets. Its retail crisis has been closely linked to the failure of the “mall” model, gigantic shopping centers on the outskirts of the country where they concentrate 70% of its stores there. On the other side of the pond they have 2.200 square meters of gross leasable area per 1.000 people, compared to the average 242 square meters in the rest of Spain. The personal cost of moving those areas to that point is much higher, and also people are using internet more (the 16% mentioned above) to buy there (6%).
But this doesn’t mean it will not affect us: A survey that took hundreds of retail professionals in Spain, the United States and United Kingdom reflected that 46% of all survey participants declared having closed one or more establishments in high street last year. According to PwC, the UK lost 1.000 net stores only in half a year of 2018.
Are stores closing in Spain? According to the INE, at the start of January 2018 there were 10.979 retail stores registered, less than two years before. Between 2015 and 2017, twice as many establishments were liquidated than the three previous years, when the crisis of the Lehman Brothers was still noticeable.
Retailers a side, the trend is also worrying: in a quarter of 2018 Inditex closed more stores than it opened. Dia, C&A, H&M, Carrefour, El Corte Inglés, Media Markt are businesses in trouble, and they all know that the increase in revenue with aggressive prices is an exhausted solution.
Why should we worry:
It is clear that Amazon is going to be very disruptive in the US, because the way they organized their sales spaces, but just because we are not like them, doesn’t mean that our stores will come untouched: Between 2008 and 2017 the commercial space has grown 19% and nevertheless, the sales have gone down a 2% according to Nielsen. “The surface grows more than the number of consumers”. In these recent times sales have increased beyond our means, affecting the wholesalers. The strength that this will have will depend on how Spaniards turn to the online environment.