Through the first half of 2019, the U.S. retail market has seen the impacts of changing consumer preferences, online competition and technological innovation accelerate. Through the middle of August, 7,922 store closures have been announced according to Coresight Research, far ahead of all of last year’s total of 5,864 closures. Almost 6,200 of those closures, though, were recorded during the first quarter, so the pace has slowed significantly.

On the plus side, retailers, to date, have also announced that they will open 3,258 new physical locations, which is on pace to beat last year’s store opening tally of 3,258. While the net effect will be fewer stores, the U.S. retail market continues to perform quite well.

Over the past 12 months, “core” retail sales (excluding automobiles, gasoline, building materials and restaurants) totaled $527.7 billion according to U.S. Census Bureau data. The National Retail Federation (NRF) notes that consumer spending accelerated during the second quarter and projects sales growth between 3.8% and 4.4% for 2019, which is in line with annual growth of near 4% since 2010.

Additionally, online sales are expected to grow 11.4% year over year. But it is not a battle between e-commerce and brick and mortar. Nearly all of the top 50 online retailers operate physical stores. In fact, direct-to-consumer brands expect to open 850 stores over the next five years to accommodate the fastest growing segment of e-commerce – BOPIS or “buy online, pick-up in store”. Also known as “click and collect”, this concept saves on shipping and the cost of receiving and processing returned merchandise, along with the added benefit of an increased number of consumers visiting the store.

So while sensationalized headlines of a retail apocalypse continues to attract media attention, the truth is much more nuanced. Retail sales continue to grow. Retailers are opening new stores, including those who once maintained an online-only presence. As we’ve stated before, it’s not an apocalypse, but a revolution, or transformation if you will.

The U.S. remains over-retailed in comparison to the rest of the developed world, even taking into account population density. So, it makes sense to close poorly performing stores. Other closures are due to numerous factors such as mismanagement, over-leveraging or a failure to adapt to the new shopping preferences of the younger generations. But the wild predictions of doom and gloom that seem to have taken hold are way over-stated. Recently, IHL Group analyzed a UBS report that generated additional apocalyptic press coverage in which the authors projected that retailers must close 75,000 stores by 2026 due to e-commerce. IHL Group found that the report relied too much on math, without accounting for existing retail trends, and was biased towards online as the primary and preferred future of retail.

An NRF summary of IHL’s study concludes that “shopping isn’t going to disappear, and neither are stores.” Remember, the fastest growing sector of e-commerce is “click and collect.” Conveniently located stores are absolutely necessary to satisfy this growing consumer preference. In that sense, stores may take on more of a fulfillment center role, but to attract new customers and maintain existing ones, physical retail needs to offer much more in the way of experiences.

Retailers have responded to this growing desire for experiences by trying to seamlessly integrate the various channels through which their customers engage with their brand and products. This has come to be known as an omnichannel strategy. But retail analyst, Steve Dennis, writing in a recent Forbes article posits that all the talk about different channels is meaningless. One can’t be everywhere and offer everything to every person. In reality, the customer is the channel and he calls this concept “harmonized retail.” Harmonized retail is defined as “showing up in remarkable ways at the moments that matter in a customer’s journey.” Eliminating friction points and implementing truly memorable experiences through deep customer insight will be the winning strategy.

In sum, we would not define the current state of retail as apocalyptic. Be it a “revolution” or “transformation,” retail is alive and well and in many ways getting better. Some pain will continue in the near term, as weaker brands are weeded out and retailers adapt to the new way of shopping.

About the author:

Loren DeFilippo is the Director of Research for Colliers’ Ohio markets, providing analysis and insight on commercial property trends. Drawing on 30+ years of experience, Loren focuses on turning data into actionable intelligence for our clients and brokerage teams.