US witnesses closure of brick-and-mortar departmental chains

Right after the holiday shopping season in the US, Sears Holdings went in the process of closing down 108 Kmart and 42 Sears Stores while Macy’s is already closing down 68 stores across the US by end of this year. The closures also indicated massive layoffs in the country. Retail giants like JC Penney, L Brands, Target and Kohl’s are also bleeding to operate their physical retail operations.

Terry J Lundgren, Chairman & CEO, Macy’s response in press reports said, “We already reported our decision to close down around 100 stores last year. Downsizing our huge physical footprint wasn’t an easy decision. We have carefully identified certain locations where monetizing on real estate cost will be challenge and which are no longer preferred shopping destinations for our discerning customers. However, we plan to strengthen and invest in our digital reach and find substantial success there.” While online shopping players like Amazon is investing in brick-and-mortar retail while integrating robust digital interface within them, the news came as a shock to many.

Explaining on factors that caused the store closings, Dana Telsey, top ranked equity research analyst covering the global retail industry and CEO and Chief Research Officer, Telsey Advisory Group, informed the media, “I think this is a department store issue and not a consumer issue. What happens in these departmental stores are that the Black Friday Sale and similar promotional offers boost sales but the shift in online has been slow but steady. One has to bone up on their digital operations or be part of online retail giants like Amazon etc. What I think is you need to have multi-channel distribution and more research of categories of products in order to succeed. I don’t think these retailers are going away but they will be dead money for a while.”

This trend seems to be opposite in India, where the retail industry in the country is growing at the rate of 12% and organised retail industry growing at 21%, according to a report from Boston Consulting Group.

Sources : Vogue, CNBC