The economic landscape of 2019 was vastly different to that of 2020. The trade war between the US and China loomed large, and threatened to end the stability of the global financial markets. This naturally impacted GDP growth which declined quarter on quarter heading into 2020. Analysts at Deloitte anticipated GDP slowing to a crawl at 1.6% in 2020. We now know that the economy has been upended in an unprecedented way, what with the novel coronavirus destroying any hopes of a return to normalcy, any time soon. Consumer spending has contracted sharply, and uncertainty is the order of the day.
Prior to the outbreak of the pandemic, expectations of a 2.2% growth in real consumer spending were forecast. In these unprecedented times, it is exceptionally difficult to forecast the impact of the novel coronavirus on labor markets, wage growth, disposable income, and rising unemployment levels. Yet, even within this quagmire there is a degree of predictability with regards to certain trends. The Retail Apocalypse which began in 2010 has accelerated sharply in 2020. Tens of thousands of retail operations have shuttered their doors, owing to rising costs, declining footfall traffic, social distancing, and government-issued mandates to guard against the pandemic.
Meeting Customers Where They Shop
One of the most notable changes to take place in 2020 is the shift in retail industry trends where customers want to shop. There is no denying the rapid and unprecedented decline in the popularity of malls across the country. Once a staple of American retail enterprise, malls are trending towards persona non grata status for a variety of reasons. For starters, high fixed costs, limited market reach, and the decreasing popularity of shopping centers are a reality that retailers must contend with. Time.com writer, Josh Sanburn penned an op-ed titled, ‘Why the Death Of Malls is About More Than Shopping’, and he went to great pains to explain this phenomenon. Once a nexus of American social activity, malls no longer serve that role. Hundreds of thousands of jobs have been shed annually, as malls contend with declining footfall, increasing costs, and diminished sales.
This naturally lends to an entirely different set of thought processes around retail activity in the US, and elsewhere. Major brand names like JCPenney, Macy’s, Forever 21, Modell’s Sporting Goods, Pier 1 Imports, Dressbarn, Ascena, NY&C, Muji, Brooks Brothers, NPC International, Chuck E. Cheese, GNC, 24 Hour Fitness, Advantage Rent A Car, Neiman Marcus, Gold’s Gym, True Religion, and at least 100+ others in 2020 alone have filed for bankruptcy owing to the effects of the Retail Apocalypse. For many of these retail operations, there simply was no other alternative save for bankruptcy and liquidation. When multiple stores in a chain are unprofitable, divestiture from poorly performing units is the standard operating procedure. Whether it’s Chapter 7 bankruptcy, or Chapter 11 bankruptcy, many of these retailers had no choice.
Specific Case Studies: Modell’s Sporting Goods and Pier 1 Imports
Modell’s Sporting Goods is a 131+ year-old staple in American retail sporting goods apparel. It has an established presence across the north-east, and beyond. Brand awareness, market penetration, and industry-leading dominance are features of this brand. However, declining sales and profitability [exacerbated by current market conditions] rapidly led to an untenable situation with the company. According to industry reports, this sporting goods retail operation filed Chapter 11 bankruptcy proceedings in March 2020, and then requested an extension owing to the devastating effects of the novel coronavirus on proceedings. The company ran 134+ retail outlets, and was put up for sale after operations shuttered. Retail E-Commerce Ventures (REV), under the stewardship of investor-entrepreneurs Tai Lopez and Alex Mehr acquired the company’s assets for $3.64 million.
Their motivation behind the purchase was simple: ‘Sporting goods is a great vertical to be in, and Modell’s is a well-known and beloved brand in that vertical.’ [Alex Mehr CEO of REV]. With social media icon Tai Lopez revolutionizing the retail industry, along with his millions of followers, Modell’s Sporting Goods has undergone a dramatic reconstruction with an e-commerce makeover. By meeting customers on their turf, Lopez and Mehr believe that the Modell’s brand can be salvaged, and ultimately prove to be profitable in a big way. Now, customers are able to purchase all their favorite sporting goods online. The shift from traditional retail operations to bricks and mortar is well and truly underway. Modell’s is one such example of how that transformation is playing out in real time.
Making the Case for Pier 1 Imports
Pier 1 Imports is another iconic brand in the US which recently announced that it was going out of business. Once again, the brains trust behind REV, Alex Mehr and Tai Lopez were front and center. They are of the opinion that the future of retail is e-commerce. In February 2020, Pier 1 Imports filed for bankruptcy and closed all of its retail outlets as the novel coronavirus was battering the global economy. At the time, REV [Retail E-Commerce Ventures] outbid its competition and purchased Pier 1’s virtual assets for a price of $31 million. REV now boasts an impressive portfolio of assets, from distressed retail brands that have been transformed into e-commerce success stories. These include Dressbarn, the Franklin Mint, Linens N Things, Mentor Box, ESR Holdings, Knowledge Society, and The Book People, et al.
The lesson learned from the changes in the retail industry are clear: Consumers are taking their business online and businesses that fail to heed this call will be relegated to the annals of history, along with the dinosaurs.