The US Retail Sector is expecting a Bloodbath

The US Retail Sector is expecting a Bloodbath

A few days ago, US giant sport apparel retailer SPORTS AUTHORITY has announced that it will close all of its 460 stores nationwide, after failing to find a buyer for them. Once again, it is a part of american retail history that disappears. Sports Authority has failed to adapt its model to compete with both online sport retailers (Amazon of course but also NBA or NFL e shops) and leading physical big boxes like BIG 5, REI or Dick’s Sporting Goods.

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No retailers, even those that can rely on a large physical network, are now immune from brutal and lethal financial crisis.  One year ago, RadioShack and American Apparel were forced to close a lot of their stores in an desperate attempt to cope with a dramatic drop in sales. Anyway, most of these bankruptcies are due to wrong strategic decisions or poor operation.

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What is really worrying is that even strong and popular retailers are now in trouble too, and are forced to shut down their weaker stores after struggling with a series of sharp decreases in sales. In that case, e-retailers are taking it all. As American consumer shopping habits have changes dramatically over the past recent years, especially on the textile market, leading physical retail brands continue to lose market share.

Walmart, Macy’s, Kohl’s, Target, Sears, Kmart have recently reported horrible results in textile sales and announced massive store shutdowns to only focus on the most profitable units. What these companies have in common is that they are very reliant on apparel, a category with an industrywide oversupply that has led retailers to discount unceasingly to get rid of their merchandises. Increasingly seen as a commodity, textile is now mainly sold through e-retailers. As a consequence, Amazon is expected to surpass Macy’s as the top clothing store next year.

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Financial experts are now talking about a “retail blood bath”. Even though the American economy is still robust, major US retailers are in trouble. Dark future ahead ? The answer lies in delivering a true customer experience in physical stores. That is the reason why the American customer is still spending money on restaurants and leisure. But, until he gets more excitement in apparel, the textile market would become a replenishment market that would mainly be captured by online retailers.

The other concern is related to private labels dull sales. While Kohl’s private label Sonoma is generating roughly half of its sales, the American department store whole business model is now in trouble and needs serious adjustments. In contrast, exciting and experiential national brands such as Nike are showing strong resistance to retail turmoil.

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It is no surprise to see that Europe is following the same trend. Apparel sales are in recession over the last quarters and private labels, even in the food market, are experiencing trouble as well.

What a stressful and exciting period for retailers indeed. It seems that there will be no viable future for retailers without a strong retail concept and an exciting brand positioning. People want experience, boldness and radical choices. After all, bad news is good news.

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