Store Closing Announcements Signal Omni-Channel Future is Here

Store Closing Announcements Signal Omni-Channel Future is Here

The future seems to be here when it comes to retailers moving to smaller bricks-and-mortar presence, as both Walgreens Boots Alliance and Pier 1 Imports announced yesterday they will be closing hundreds of stores. The closings come in the same week as Business Insider has leaked a memo from Apple retail head Angela Ahrendts telling employees to encourage customers to order Apple’s new smartwatches online, instead of mobbing the company’s retail stores. So should retail center landlords be worried?

Well, not exactly. Both Walgreens and Pier 1 appear to be doing fine overall. Executives with Walgreens, which operates 8,232 stores in the U.S., explained that the 200 planned store closings will allow the company to be more aggressive in slashing operating costs, reports CNN Money. Pier 1 Imports CFO Laura Coffee said that the 100 stores Pier 1 plans to close (as they come up for lease expirations over the next three years) are still profitable, but “closing them through this natural cycle will be accretive to earnings before interest, taxes, depreciation and amortization,” according to The Motley Fool.

Meanwhile, when it comes to Apple, according to Business Insider, “It is a poorly kept secret among employees at Apple stores that the best way to obtain newly launched products is to order online and avoid the stores.”

In a larger sense, what’s happening is that “Closings have become a growing trend in the retail sector as brick-and-mortar stores face growing competition from online outlets. Even traditional chains are trying to respond to more sales shifting online,” CNN Money points out.

Just two weeks ago, Forbes warned that massive store closing will reshape the U.S. retail sector. The magazine estimated that even before announcements from Walgreens and Pier 1, the industry was looking at 3,204 chain store closings before the first quarter was even over. The retailers closing stores ranged from bankrupt RadioShack and Wet Seal to merging Office Depot and OfficeMax.

“It’s no secret that the U.S. landscape has been chronically overstored for years,” Forbes noted. “For example, ‘the US has nearly 40% more retail square footage than its Canadian neighbors to the north,’ the FBIC report said. Compounding that is double-digit e-commerce growth, which is eating into consumers’ shopping trips.”

The good news, however, is that the retail sector itself continues to be healthy, even if more companies are pursuing portfolio optimization and an omni-channel approach, as they have been urged to do for years. This may lead to a new way of doing business for mall and shopping center owners, as Taubman Centers’ COO William Taubman already predicted.

According to Barbara Farfan, at About Money, the recent store closings represent the new model of retail shopping that’s been a long time coming.

“The tedious and time-consuming process of slogging from store to store seeking ‘the perfect’ whatever is becoming less of an entertaining recreational hobby, and more of an avoidable annoyance,” she writes. “Retail store closings in the U.S. are no longer a reflection of poor economic health, they are a reflection of an antiquated distribution system that is increasingly losing its appeal to the average consumer.”

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