Stores are closing in astounding numbers — 5,994 plan to close this year alone.
An FKD Feature exclusive

Liquidators that specialize in retail stores, such as Great American Group, are in a novel position. Although companies like Great American Group have been busy in recent years, one thing has been missing: “In all the other cycles, including 2008, a lot of people would come in and buy racking, circular racks and so on,” said Ryan Mulcunry, the COO of Great American Group. “They’d buy it all and warehouse it and wait until somebody wanted to reopen a store and sell it back to them. Those people have gone away.”

What’s happening?

People don’t think retail is going to grow anymore from a brick-and-mortar perspective. As the internet continues to change shopping habits, stores across the United States continue to close. Less than halfway through April, American retailers have announced plans this year to shut 5,994 stores, exceeding the 5,854 announced in all of 2018, according to data from Coresight Research.

The announced closings still have a way to go before they reach the 2017 record of more than 8,000. And openings and renovations are still taking place. Coresight has tracked announcements of 2,641 store openings by retailers in the United States this year, compared with 3,239 for all of 2018. Many of this year’s openings are dollar stores and other discount chains — areas that are less threatened by e-commerce right now. Online retailers like Warby Parker also are opening stores, though on a small scale.

In the past year, liquidation sales have happened at Bon-Ton, Toys “R” Us, Charlotte Russe, Gymboree and Payless, shaking up the lives of employees. Payless and Gymboree — which both filed for bankruptcy this year for a second time — account for almost half of the announced closings.

The liquidators’ role

Great American Group and Tiger Capital Group are among a handful of businesses that have managed store liquidations for years, hired to wring as much value from them as they can. Both worked on the Bon-Ton and Toys “R” Us closings last year.

“When we’re doing a liquidation sale, it’s all about recovery versus time — the longer you are open, the more expensive it is,” said Michael McGrail, chief operating officer of Tiger Capital. “It’s all about getting this thing moving, moving it fast, starting on a certain day and being out by a certain day.”

Mall-order clothing retailers can shut down in as little as five weeks, furniture stores may take 12 weeks, and jewelry stores can last 20 weeks, McGrail said. Tiger Capital uses different models to optimize sales, with the goal of leaving nothing in the store, including furniture, jewelry cases and shelves.

Stores, understandably, have a problem with employee retention while a closing is in progress. Mulcunry says they try to maintain a sense of culture while these closures are taking place, sometimes even offering bonuses to employees who stay up to 60 days after a store closing is announced. Mulcunry said it was “like we’re running a retailer for the short term.”

Takeaway

McGrail views the power shifts in retail as a “slow and steady” evolution. “Even though we’re seeing this bump of store closures now, it’ll slow down a bit and then we’ll see another wave,” he said. Still, he said that he expected retail square footage to continue to shrink and a widening of the gap between the best malls and more mediocre locations.

“It’s not really a recession-driven or, even to an extent, management-driven change — it’s a change in the way people are buying,” Mulcunry said. “Retail is not dying. It’s just changing, so we’re a part of that change.”

 

 

Have something to add to this story? Comment below or join the discussion on Facebook.

Header image: ShutterStock

Author

Posted 04.18.2019 - 08:56 am EDT