Retail Lives at a Discount

Retail Lives – At A Discount

2017 research from IHL Group about store closings.

Research from IHL Group detailing store closings in 2017.

It would be easy to proclaim the end of days for retail stores. But amid the decimation of household names like Sears and RadioShack, one retail sector is expanding: discount stores.

According to IHL Group, so far this year the closure of 5,321 stores has been announced, a 218% increase over 2016. The biggest losers have been RadioShack and Payless, with 1,000 and 512 closings, respectively. Other big chains shedding triple-digit numbers of locations include Gymboree, Rue 21, Sears and Kmart, and J.C. Penney.

Mall-based retailers have been struggling amid the expansion of online commerce, and it looks like the fight is nowhere near over. Earlier this month, Credit Suisse predicted that 20%-25% of American malls could close over the next five years.

“It’s an example of fundamental transformation and an example of what happens when retailers don’t stay in contact with their core customers,” says Jeff Roster, Vice President of Retail Strategy at IHL Group.

But hope remains – for some. Amid the quicker drumbeat of bankruptcy filings and closure announcements, store openings are rising as well this year. have been up 53% year to year, with Major chains have announced the opening of 3,262 locations since the start of 2017, according to IHL, a 53% increase over last year. Discounters dominate the top of the table, with Dollar General announcing the opening of 1,290 locations while Dollar Tree announced 650 openings.

Research from IHL Group detailing 2017 retail store openings.

Research from IHL Group detailing 2017 retail store openings.

Dollar General already had more stores across the country than any other retailer.

Food is the unifying theme for the expansion of dollar store discounters. The leading dollar store chains have thrived over the past few years by expanding their food selections, turning into more of a one-stop shop. With food at the forefront, customers have more of a reason to make more frequent visits.

Aldi, the discount German grocer specializing in private-label food staples and household items, is adding 400 stores by the end of 2018 to its current count of 1,600. With its German arch-competitor Lidl opening up its first U.S. locations earlier this month, Aldi announced a $3.4 billion plan to open another 500 stores by the end of 2022, on top of a $1.6 billion effort unveiled in February to remodel and expand about 1,300 of its existing stores with a more upscale look to enable it to better compete higher up the food chain with the likes of Whole Foods.

Elsewhere in the discount realm, TJX has been an anomaly in the apparel retail sector, with 111 new store openings announced this year and robust net income of $2.3 billion for 2016.

The owner of T.J. Maxx and Marshalls has thrived by rapidly refreshing a limited assortment with prices 20% to 60% lower than other retailers. At a time when department store chains are struggling to define to shoppers why they should come to the store rather than shop online, TJX makes the vast majority of its profits at its approximately 3,800 physical locations, with same-store sales rising for 33 straight quarters, according to the Wall Street Journal.

“Power is increasingly in the hands of the brands,” writes Christian Buss, director of softlines and retail analyst at Credit Suisse, in his initiation note on the sector. “We believe brand differentiation will help set apart (retailers) who are looking to attract consumers.”


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