Markets

Retail Apocalypse: Everything You Need to Know

Published

8 years ago

April 28, 2017

Jeff Desjardins

Chart: Retail Apocalypse 2017

The Chart of the Week is a weekly Visual Capitalist feature on Fridays.

The steady rise of online retail sales should have surprised no one.

Back in 2000, less than 1% of retail sales came from e-commerce. However, online sales have climbed each and every year since then, even through the Great Recession. By 2009, e-commerce made up about 4.0% of total retail sales, and today the latest number we have is 8.3%.

Here’s another knowledge bomb: it’s going to keep growing for the foreseeable future. Huge surprise, right?

Signs of a Reckoning

Retailers eye their competition relentlessly, and the sector also has notoriously thin margins.

The big retailers must have seen the “retail apocalypse” coming. The question is: what did they do about it?

Well, companies like Sears failed the shift to digital altogether – in fact, it is even widely speculated that the former behemoth might file for bankruptcy later this year.

The majority of other companies, on the other hand, are trying to combine “clicks and bricks” into a cohesive strategy. This sounds good in theory, but for established and sprawling brick and mortar retailers with excessive overhead costs, such tactics may not be enough to ward off this powerful secular trend. Target, for example, has had impressive growth in online sales, but they still only make up just 5% of total sales. As a result, the company’s robustness is also in doubt.

Wal-Mart took another route, which could potentially be the smartest one. The company hedged their bets by buying Jet.com, which was one of the fastest growing online retailers at the time. Later, they followed up by buying an online shoe retailer to help fill a perceived gap in footwear. Recent reports have surfaced, saying that these acquisitions are leading to staff shakeups, as the company re-orients its focus.

After all, going online is not just a tactic to boost sales in the new era of retailing. It has to be a mindset, and one that is central to the company’s strategy. Hopefully Wal-mart gets that, otherwise they will also be in trouble as well.

Apocalypse Now

In the midst of all of this is what is described as the “retail apocalypse”.

There are two main metrics that are pretty black and white:

Number of Bankruptcies: We’re not even one-third through 2017, and we already have about as many retail bankruptcies as the previous year’s total. If they continue at the current pace, we could see over 50 retailers bankrupt by the end of the year.

Number of Store Closings: So far we’ve seen roughly 3,000 store closings announced in 2017, and Credit Suisse estimates that could hit 8,600 by the end of the year. That would easily surpass 2008’s total, which was 6,200 closings, to be the worst year in recent memory.

Here’s some of the companies that have already filed for bankruptcy: