Shutting Down More Stores And Reducing The Size Of Stores Are The Direction Of Us Department Stores And Clothing Retailers In 2020.

 

In 2019, consumers continued to turn to other online competitors such as Amazon (Amazon), which led to the impact of physical retailers in various fields. The authoritative rating agency Moody 's Investor Service (Moodie) listed a total of 17 retail or garment companies whose credit rating is Caa1 or lower as of 5 December. These companies will be considered highly risky by loan agencies. J.C. J.C., Neiman Marcus, fashion brand Forever 21 and home retailer Pier 1 are among them.

 

Although traditional retailers such as Macy s Inc. (Messi general store) and Gap Inc. have invested in e-commerce and store experience, it is doubtful whether this is enough to restore their former status.

 

Department stores in the United States were the worst performing sectors in the S&P standard 500 in 2019. The standard & Poor's 500 department store index (S&P 500 department stores index) fell by nearly 30%. Messi, Gap, Kohl s Corp. (corse department store), the secret parent company of Vitoria (L's Brands) and stores were the worst performing stocks in the index.

 

At the same time, the retail industry is deteriorating. As of the end of October 2019, more than 7600 stores closed and hit a record high in the same period, according to data from Credit Suisse. Credit Suisse said the outlook for 2020 is also not optimistic. If these retailers fail to achieve sales growth in the face of increased investment, their prospects may be even more bleak if there is a recession.

 

Analysts say next year's key trends are:

 

Closing stores

 

Morningstar Investment Service analyst David Swartz said department stores had to scale down the scale of their stores. For example, Messi's department store does not need hundreds of large shopping malls, especially the two or three line shopping centers with close down risks. J.C. Penney Co. is also facing the same problem.

 

Messi's department store has 640 similar department stores, and has been gradually closed since 2016. J.C. Penney has about 850 stores in the United States, shutting down 27 of these stores this year, and terminating sales of home appliances and furniture, focusing on clothing and other categories.

 

David Swartz said: "retailers like Messi and J.C. Penney, who own a large number of super stores, must make decisions as soon as possible after a further decline in profit margins. I think we will see some major changes next year. "

 

At the same time, Gap plans to close about 230 stores, revolutionize business models, and focus more on Old Navy and Athleta brands. Apparel retailer Abercrombie & Fitch Co. will also close its flagship store.

 

Forrester Research analyst Sucharita Kodali said that even if stores do not shut down, they will reduce the scale of stores. As consumers' online shopping activities become more and more, their demand for large sales space is decreasing. Take the old luxury department store Lord & Taylor as an example, the company is evaluating the size of its stores and plans to launch a more compact new model.

 

Focus on customer experience

 

For department stores that want to reduce inventory backlog, creating an unforgettable experience is the key to attracting customers. One of them is to reform the retail space.

 

David Swartz said: "in fact, clothing sold in different channels is not very different, so retailers must provide different experiences."

 

More retailers may follow the new concept store Nordstrom Local mode, focusing on customization, return and help customers find specific styles, rather than just selling goods.

 

Gabriella Santaniello, founder of A Line Partners, a retail consultancy, said restaurants in the retail space should be more valued. Neiman Marcus and Nordstrom have relocated their bars and cafes closer to the commercial area, which "blurred the boundaries between retail and catering."

 

J.C. Penney has also transformed a store, adding yoga rooms, video game rooms, high-tech personalized dressing rooms, and launched some fashion courses. Kohl 's allows Amazon users to return products at their stores to attract customers to stay for a while and buy other products.

 

Introduction of second hand consignment business

 

Second hand consignment business will also push retailers to new directions. According to GlobalData's global data research on second-hand clothing consignment business platform ThredUp, the second-hand clothing market is expected to grow to $32 billion in 2020, up from $28 billion in 2019.

 

Gabriella Santaniello said: "we will continue the trend of consignment, which is reasonably affecting the way we buy many products. Retailers will have to adapt to it. "

 

Clothing companies may be forced to improve their services or join the consignment market, she said. More clothing retailers are expected to form a partnership with second-hand trading platforms, such as ThredUp, which announced in August last year that it would work with J.C. Penney and Messi stores.

 

Financial services revenue decline

 

Morgan Stanley said that because of the new accounting regulations, the Credit Income of retailers, especially department stores, could also decline significantly. Credit income is the profit sharing of retailers from cooperative financial institutions.

 

From January 1st, the United States will replace the existing Allowance for Loan and Lease Losses (Accounting) accounting standard with the Current expected credit losses (CECL) accounting standard. It requires financial institutions (banks) to include future credit losses (such as bad debts) into the financial list, and the new policy will take effect from January 1, 2020.

 

Morgan Stanley said in a customer report that the impact of department stores on this change will be greater than that of the market, because their reliance on credit income has increased and operating income has continued to decline. Morgan Stanley said: "we expect that the drop in credit revenue will have the greatest impact on the department store of Messi. Target (Taghit) is the safest. "