Online versus on foot
There is absolutely no escaping the fact that online shoppings is taking the retail world by storm.
Children’s clothing retailer Gymboree just became another casualty in the retail apocalypse.
Chapter 11 for Gymboree
Early this week, the San Francisco-based company filed for Chapter 11 bankruptcy protection. This will reduce the company’s debts by $900 million, but will force the chain to close 375 of its 1,300 stores.
“We expect to move through this process quickly and emerge as a stronger organization that is better positioned in today’s evolving retail landscape,” said CEO Daniel Griesemer in a statement.
While their CEO may be optimistic, it’s pretty worrying when seemingly solid, long-lasting brands like Gymboree take a nosedive.
And Gymboree isn’t alone. Retailers are dropping like flies. Rue21 and Payless Shoesource also filed for bankruptcy within the past year. Several other brands have been forced to closed stores, or to dissolve entirely.
Analysts are anxiously predicting who will fall next
Credit rating agency Fitch published a research note on Monday containing a list of “loans of concern” – that is, companies so severely in debt that it’s probably only a matter of time before they file for bankruptcy.
The list includes Sear’s, Claire’s, Nine West, 99 Cent Stores, J.Crew, True Religion Apparel, Charlotte Russe, Charming Charlie, NYDJ Apparels, and Vince.
Fitch says that all of the companies on the list are at risk of defaulting within the next year.
Pinpointed reason
Fitch blames their pessimistic outlook on “online penetration, along with shifts in consumer spending towards services and experiences” and “adverse trends in mall-based shopping.”
In other words, modern consumers are weighting their budget towards entertainment and dining out rather than apparel or consumer goods.
When it comes time to shop, especially for clothes, they go online, rather than to the mall.
Shopping at brick-and-mortar stores just for the sake of shopping, or as a social activity, is on the decline. “These factors have created a highly competitive retail environment,” says Fitch.
#BreakingBricks
