Is this the end to retail stores as we know it?

The giant wave of U.S. store closures

2017 will be remembered as the beginning to the end of retail stores as we know it. Retailers, which include many fashion chains, are closing over 3,000 stores in the first half of this year alone, creating large gaps to fill for malls and shopping districts.

In 2016, online sales accounted for 7.7% of total retail sales in the U.S., which is a low percentage compared to 13.8% in China and 15.6% in the U.K. This statistic shows that the well-developed system of U.S. retail stores should not be underestimated, and that consumers are still enjoying the brick-and-mortar shopping experience. Nevertheless, the growth rate of e-commerce through websites such as Amazon seem to be sweeping out underperforming retailers.

In the fashion industry, this trend is quite evident. “THE LIMITED”, the once major apparel chain founded in 1963, announced the closure of 250 stores and 4,000 job cuts. Although they hope to make an early revival, all operations including their online store are currently closed for business. “RUE21”, the teen retailer that had over 1,200 stores in the U.S., also announced plans to close more than 400 stores. Department stores such as “SEARS” and “J.C.PENNEY” are also hoping for a turnaround after cutting unprofitable operations.

America’s iconic “Ralph Lauren” will close their 5th avenue flagship store in New York. The brand will continue to improve their online experience while cutting underperforming stores. “American Apparel”, once popular in Japan for their cut and sewn products, as well as “True Religion”, the brand that dominated the world with their premium jeans, have filed for bankruptcy protection. From luxury brands to everyday labels, the U.S. fashion industry is seeing a major decline in retail business.

“Colette”, the iconic concept boutique in Paris, has also shocked the industry with the announcement of their store closing. Although details behind the closure have not been confirmed, the store has been a leader in high-fashion since their opening in 1997 and their presence will be greatly missed.

Will Japan follow the trend of U.S. retailers?

Many major retailers in Japan have also been closing their doors. “Sanyo Shokai” carried 22 brands in early 2016, but is cutting down to 16 brands by the end of August 2017. They have also cut back on their points of sales from 1,500 to 1,100 locations. The LA-based boutique “Fred Segal” made their Japan debut in just 2015, but have already shuttered their Yokohama location and online store. Japan operations, which include the Daikanyama and Kobe stores, will be taken over by Hiroyuki Fujita, former head of “nano universe”.

Despite the increase in store closures, Japan is certainly not experiencing as big a wave as the U.S. However, chains that operate tens to hundreds of stores are definitely facing a crossroad.

During these difficult times, “Mash Holdings” and “TOKYO BASE” are both seeing growth in performance. “Mash Holdings” carries brands such as snidel and gelato pique that have become popular among young women by capturing their needs and presenting a certain dreamy lifestyle through the brands. “TOKYO BASE” which operates “STUDIOUS”, a boutique that carries distinctive Japanese brands, as well as the high-fashion brand “UNITED TOKYO”, has been successful by focusing on products made in Japan. One of the keys to UNITED TOKYO’s success is their ability to offer high-value products that match their cost rate of 50%.

It is evident that both the U.S. and Japan are overflowing with retail stores, so retailers will most likely continue to make necessary cuts. As a result of this, we can only hope that we see a rise in unique and inspiring brands.

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