Retailers going bankrupt in the US; can SL learn from this?
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Some 8600+ retail stores are expected to close in the US by the end of the year. Analysts at Credit Suisse count roughly 2,880 store closings announced this year through April, and this trend will continue till the end of the year bringing the final count to 8600+. The number is so staggering that number of closures will exceed the number of shops closed during the Great American Recession.
This is NOT happening because of an economic downturn in America, with consumer confidence at an all-time high. What is driving the closure of these businesses is in large part due to eCommerce reaching maturity point in the US. And as in most cases not very many people saw this coming; especially the ones that have been involved in traditional retail.
Immediate impact
Big chains in America are literally going out of business like Macy’s, Bebe, Sears, and Payless just to name a few. Which means retail jobs are being lost and businesses are filing in large numbers for bankruptcy. The US retail industry lost some 60,000 jobs and to put things in perspective there are 53,000 jobs that make up the entire US coal industry (Bloomberg).
Reaction from retail
“It’s an industry that’s still in search for answers,” said Noel Hebert, an analyst at Bloomberg Intelligence. “I don’t know how many malls can reinvent themselves.”(Bloomberg). In essence since no one really saw this coming, everyone is in shock.
While most retailers are just closing shops (Kenneth Cole) others are trying to reinvent themselves with many opting to try to master eCommerce. But the latter might be too little too late. Industry experience gained by the eCommerce industry over two decades cannot be learnt overnight no matter how much of money these industries throw at it.
Why is this happening in the U.S now?
The answer is simple. Consumers find it easier to shop online. Led by Amazon, eCommerce companies over the last 20+ years have gained in terms of user experience, price and trust to overcome most reasons shoppers have for visiting physical shops.
“Today, convenience is sitting at home in your underwear on your phone or iPad,” Credit Suisse Group AG analyst Christian Buss said. “The types of trips you’ll take to the mall and the number of trips you’ll take are going to be different.” (Bloomberg).
What is in store for Sri Lanka?
The garment industry in Sri Lanka which depends on exporting to the US will most likely get affected by these closures in the mid to long term. The industry should closely look at the US retailers who are planning on scaling back and then trying to move out of those channels if they are to survive in the longer term. They will also start gearing themselves to serve a sophisticated pull-based supply chain augmented with a lot of technology rather than traditional in-bulk push-based supply chain.
While there are some differences between the US and Sri Lankan traditional retail landscape there are similarities. The trends will most likely be happening here sooner rather than later.
(The writer is the co-founder/CEO of takas.lk. The opinions shared on this piece are personal and does not necessarily reflect the views of the organisation. Hecould
be reached atlahiru@takas.lk)