US 'retail apocalypse' only just beginning
By Bilal Kathrada - May 27th, 11:31
The “retail apocalypse” in the US has claimed more victims in the first quarter of the year than last year combined.
By end of last month, almost 6000 retail stores closed in the US. Last year, the figure was 5864.
This the continuation of a trend that has been going on since 2010 and, rather than slowing down, it is showing signs of accelerating. Researchers predict that by 2026, nearly 75000 stores would have closed in the US.
Some of America’s major brands are in danger of being wiped off the face of the planet. Notable brands affected are budget shoe chain Payless stores, which shut all its 2500 North American stores this year, and toy retailer ToyRUs, which filed for bankruptcy last year. Bon-Ton, a departmental chain store that has been operating since 1898, went insolvent last year.
Other brands, while not as badly affected as Payless and ToysRUs, are feeling the pinch. Fred’s, a discount department store chain, is closing 160 stores this year, while Family Dollar, a discount chain that specialises in items between $1 (R14.50) and $10, plans to close 400 of its stores.
Things in South Africa are no different. While Stuttafords and Boardmans have disappeared, others like Edgars, Jet, and CNA plan to close nearly a third of their stores, almost 1300, over the next two years. Toy store chain Hamley’s is in business rescue mode, while Baskin Robbins and Dunkin Donuts are closing shop.
Things are bad for retailers, and all indications are that the retail apocalypse is getting worse.
But it seems the apocalypse is not affecting everyone. Online retailers like Amazon are thriving: Amazon had its most profitable quarter yet this year and is the third most valuable company in the world, after Apple and Microsoft.
Online retail in the US has grown over the past five years, amounting to nearly half the growth in the retail sector. The largest growth was between 2017 and last year with a huge 15% jump. By all indications, the trend is going to continue, with experts predicting that 25% of all retail in the US will be taking place online by the year 2026.
E-commerce is showing positive growth in South Africa. According to the research paper titled Online Retail in South Africa 2019, by World Wide Worx, online retail grew to 25% between 2017 and last year, with R14billion in revenue last year. The research paper estimates that online retail is going to clock the R20bn mark by 2022, amounting to 2% of all retail.
As for the rest of the world, it is growing at equally impressive rates. The global leader in e-commerce is, surprisingly, China. Amazon might be the first name to come to mind when we speak of online retail giants, but China’s Ali Baba is a strong contender with a higher growth rate than Amazon. South Korea earned its place in e-commerce history by being the first country where e-commerce became the No 1 sales channel back in 2013.
Online business is big business and will be the dominant form of commerce in the near future. The trouble is, South Africa lags behind the rest of the world for two major reasons.
First, retailers do not seem to have woken up to the potential of online yet and do not seem to see online as a future threat to their businesses. According to the paper, only one in five businesses are willing to reinvest a significant proportion of the revenue from their online stores back into those stores. Second, poor connectivity infrastructure and high data prices hinder the growth of e-commerce and the overall economy.
While we keep debating the merits of online retail, companies like Amazon will keep growing and continue encroaching into South African markets, and it will only be a matter of time before retailers feel the pinch.
But that is not their major concern. Technology has made it possible for just about anyone to start a global e-commerce business and many enterprising South Africans have launched their own successful online businesses. It is these people who are going to pose the biggest threat to retail giants and there is little they can do about it.
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