Full screen recommended.
"Many Retailers Falling Apart As
Store Closings Continue To Soar"
by Epic Economist
"A large number of retailers are in serious trouble and they are at risk of falling apart early in 2023 due to the weakest holiday sales seen since the financial crisis, as well as soaring levels of debt, bloated inventories, and changing consumer patterns amid the ongoing recession. Many factors are forcing even popular brands, including CVS, Rite Aid, Family Dollar, Best Buy, and more, to start shutting down stores to manage their operational costs as economic conditions continue to worsen. According to a new survey, almost three-quarters of U.S. retailers are planning to hike prices due to the effect of supply chain problems and inflationary pressures on their balance sheets. Industry analysts say that a new wave of mass store closings and bankruptcies is already on the horizon, and 2023 will likely be a decisive year for the entire sector as the brick-and-mortar landscape gets increasingly emptier.
Never before in history, so many stores have disappeared in such a short period of time. From January 2020 to December 2022, over 10,220 retail stores have been permanently shut down as the sector faced the toughest conditions since 2008. Even before the pandemic, the retail industry was facing incredible volatility due to billions of dollars in real estate debt and the emergence of giant e-commerce platforms that offered everything consumers need through the convenience of a simple click.
In 2022, the cost of living crisis that financially strained millions of Americans led to slower sales and the resurrection of value as part of the purpose of consumption. Even wealthy households started flocking to Walmart and Aldi in order to make ends meet. To regain profitability, several popular brands started cutting jobs and other costs as well as closing several locations where foot traffic was declining precipitously.
According to an analysis released by Yahoo, many big names in the industry may not make it to 2023. At the same time, an overwhelming number of retail chains revealed plans to increase their prices next year due to higher operational costs spurred by supply chain issues and inflation. A survey conducted by GetResponse found that 72% of U.S. retailers will hike prices and pass on increased costs to their customers in 2023.
Roughly 89% of retailers have been facing ever-rising supply chain costs. “Hence, they might not have any choice but to increase prices because of the fact that this is the sort of thing that could potentially end up helping them continue to turn a profit,” the researchers noted. Even more alarmingly, 52% of retailers reported that sales have drastically dropped in the second half of 2022.
A significant rise in the number of distressed retailers beginning in early 2023 is expected, the expert adds, considering that ballooning prices are likely to dent demand for certain goods, and stores contend with bloated inventory levels as a recession continues to unfold. “We have potentially a perfect storm brewing,” said Sally Henry, a professor of law at Texas Tech Law School and former partner at Skadden, Arps, Slate, Meagher & Flom LLP. “I wouldn’t be surprised to see a massive uptick in retail bankruptcies.”
It’s safe to say that only a minority of retail companies will report satisfactory results this season. Even Amazon CEO Jeff Bezos is warning businesses that sales growth will not come organically when consumer spending goes down, especially during a recession, so the outlook isn’t very promising. The retail apocalypse enters yet another year, and its effects threaten to be incredibly devastating for us all."
No comments:
Post a Comment