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The worst of the retail apocalypse is on the way

(BUSINESS NEWS) We’ve long lamented the decline of big box retail, but one report says the “Retail Apocalypse” is just beginning and it’s about to get much worse.

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You have likely already noticed the impacts of what has been darkly dubbed America’s “Retail Apocalypse”: Half-empty strip malls, brightly-colored signs announcing closing sales, or maybe your once-favorite department store has declared bankruptcy.

Whatever you’ve seen, it’s only going to get worse, according to a comprehensive report from Bloomberg, implying certainty in the fall of the retail industry as more than just sensational news headlines.

U.S. retailers announced more than 3,000 store openings in the first three quarters of this year, but that’s coupled with 6,800 chain store closures. All while consumer confidence levels are high and unemployment is low, and the economy keeps growing – a mix you’d think would be conducive to retail growth and strength.

However, more and more retail chains are filing for bankruptcy and financially distressed. This has caused an increase in the number of delinquent loan payments from malls and shopping centers containing said retailers.

So what’s the deal?

No, it’s not because Amazon.com is taking over the world (yet) or because millennials would rather travel than buy more “stuff.”

The primary cause for the retail apocalypse is not buying habits, it is that many failing retail chains are overloaded with debt.

There are billions of dollars tied up in the borrowings of troubled stores, and that strain is going to become even harder for the market to handle.

The impact of retail’s crash and burn will be felt across the country and economy. Low-income workers will be displaced, local tax bases will shrink, and investor losses on stocks, bonds, and real estate will grow.

In a nutshell: It’s only going to get worse.

Until recently, retailers avoided bankruptcy by refinancing their debts. However, as the market has evolved, lenders have become less forgiving, according to the Bloomberg report.

Additionally, an overwhelming amount of risky retail debt is coming due within in the next five years. For example, teen costume jewelry chain Claire’s Stores, Inc. has $2 billion in borrowings that will start maturing in 2019 – and it still has 1,600 stores open in North America.

In fact, $100 million of high-yield retail borrowings are set to mature this year alone and that will jump to $1.9 billion in 2018, according to Fitch Ratings Inc. data cited by Bloomberg. Between 2019 and 2025, that figure will expand to an annual average of almost $5 billion.

And, while the demand for refinancing increases, credit markets are tightening. Thus far, retailers have delayed their doom thanks to the money the Federal Reserve has pushed back into the economy since the Great Recession. Low interest rates made the risker retail debt (and the higher return it brings) more appealing. But now as the Feds raise their benchmark interest rates, that demand will decrease.

Then there’s the matter of store credit cards. The largest private-label card issuer, Synchrony Financial, has already increased reserves in order to help cover loan losses this year. Citigroup, Inc. has reported declining rates on retail portfolios, too. Why? Because shoppers are more likely to stop paying back their retail card debt if the store they went to has closed.

As all this compounds, it could directly impact the industry that employs the largest number of Americans who are at the low end of the income scale. According to Bloomberg’s research, salespeople and cashiers in this industry totaled a whopping eight million. Since our last financial crisis, employment rates have been steadily increasing, even in the retail industry. Until this year, that is. Retail store jobs have decreased by 101,000 this year so far, no thanks to store closures.

Many of the largest U.S. retailers (think Target and Walmart) have decided to reduce their brick-and-mortar space. Sure, the e-commerce boom has taken a toll, but the U.S. has been considered “over-stored” ever since investors poured money into commercial real estate as the suburbs boomed decades ago, which began an era of big box stores.

It’s time for that boom to bust.

At the end of Q3, 6,752 U.S. retail locations were scheduled to close, excluding grocery stores and restaurants, according to the International Council of Shopping Centers. That’s more than double the 2016 total and inching close to the all-time annual high of 6,900 recorded in 2008, the midst of the recession.

Clothing stores have taken the hardest hit, as 2,500 locations are closing. Department stores aren’t faring well, either. Macy’s, Sears and J.C. Penney are all downsizing.

Overall, about 550 department stores plan to close their doors.

This really does sound apocalyptic, doesn’t it?

The consumer impacts of what’s to come will be widespread. Ohio, West Virginia, Michigan and Illinois have been some of the hardest hit so far, but other states will feel the burn, too. Florida, for example, relies on retail salespeople more than any other state, according to Bureau of Labor Statistics cited by Bloomberg.

Insert a grimacing emoji face here.

I think Charlie O’Shea, a Moody’s retail analyst for Moody’s, summed up the retail industry’s prospects impeccably at the end of Bloomberg’s report: “A day of reckoning is coming,” he said.

Sienna is a Staff Writer at The American Genius and has a bachelor's degree in journalism with an emphasis in writing and editing from the University of Wisconsin Oshkosh. She is currently a freelance writer with an affinity for topics that help others better themselves. Sienna loves French-pressed coffee and long walks at the dog park.

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4 Comments

4 Comments

  1. Paul O'Brien

    December 4, 2017 at 1:43 pm

    As is what’s happening with many other industries, retail’s reckoning will come and through it retailers will wake up to the fact that what people are willing to pay for is experiences.

    What the heck does that mean in this context??

    I’m not going to drive and shop at a local retailer to get the exact same plastic junk or $5 shirt that I can get Amazon to send to me in an hour.

    But let’s not neglect that people like to shop – as an activity or social experience. Shopping isn’t just about consuming the things we want or need – it’s a matter of what it has always been in certain contexts: an experience to see products, hang out with friends, or just spend some time doing something you enjoy.

    The reckoning is in the price competitive stores pushing commodities, aggressive Sales pressure (autos), and regularly purchased products. There is no market for a store front for those things.

    But what we might be excited about that could thrive are the experiences we enjoy: Local artists and products, food & beverage, specializations in innovative goods (tech, apparel, autos), etc.

    “Clothing stores have taken the hardest hit, as 2,500 locations are closing. Department stores aren’t faring well, either. Macy’s, Sears and J.C. Penney are all downsizing.”
    — Yeah… because I don’t need to drive, park, and deal with the awful layout of a big box store just to get the same pair of jeans I’ve been buying for the last 20 years.

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Business News

Why a well-crafted rejection email can save your brand, and your time

(BUSINESS NEWS) Job hunting is exhausting on both sides, and rejection sucks, but crafting a genuine, helpful rejection email can help ease the process for everyone.

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Woman sitting at computer with fingers steepled, awaiting a rejection email or any response from HR at all.

Nobody likes to hear “no” for an answer when applying for jobs. But even fewer people like to be left in the dark, wondering what happened.

On the employer side, taking on a new hire is a time-consuming process. And like a box of chocolates, you never know what you’re going to get when you put out ads for a position. So once you find the right person for the role, it’s tempting to move along without further ado.

Benn Rosales, the CEO and co-founder of American Genius, offers an example of why that is a very bad call.

Imagine a hypothetical candidate for a job opening at Coca Cola – someone who’s particularly interested in the job, because they grew up as a big Coke fan. If they get no response to their application at all, despite being qualified and sending follow-up emails, their personal opinion of the brand is sure to sour.

“Do you know how much effort and dollars advertising and marketing spent to make [them] a fan over all of those years, and this is how it ends?” Rosales explains. This person has come away from their experience thinking “Bleep you, I’ll have tea.”

To avoid this issue, crafting a warm and helpful rejection email is the perfect place to start. If you need inspiration, the hiring consultants at Dover recently compiled a list of 36 top-quality rejection emails, taken from companies that know how to say “no” gracefully: Apple, Facebook, Google, NPR, and more.

Here’s a few takeaways from that list to keep in mind when constructing a rejection email of your own…

Include details about their resume to show they were duly considered. This shows candidates that their time, interests, and experience are all valued, particularly with candidates who came close to making the cut or have a lot of future promise.

Keep their information on file, and let them know this rejection only means “not right now.” That way, next time you need to make a hire, you will have a handy list of people to call who you know have an interest in working for you and relevant skills.

Provide some feedback, such as common reasons why applicants may not succeed in your particular application process.

And be nice! A lack of courtesy can ruin a person’s impression of your brand, whether they are a customer or not. Keep in mind, that impression can be blasted on social media as well. If your rejections are alienating, you’re sabotaging your business.

Any good business owner knows how much the details matter.

Incorporating an empathetic rejection process is an often-overlooked opportunity to humanize your business and build a positive relationship with your community, particularly when impersonal online applications have become the norm.

And if nothing else, this simple courtesy will prevent your inbox from filling up with circle-backs and follow-up emails once you’ve made your decision.

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Business News

Are Gen Z more fickle in their shopping, or do brands just need to keep up?

(BUSINESS NEWS) As the world keep changing, brands and businesses have to change along with it. Some say Gen Z is fickle, but others say it is the nature of change.

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Gen Z woman shopping outside on a laptop.

We all know that if you stop adapting to the world around you, you’re going to be left behind. A recently published article decided to point out that the “fickle” Gen Z generation are liable to leave a poor digitally run site and never return. Now of course we’ve got some statistics here… They did do some kind of due diligence.

This generation, whose life has been online from almost day one, puts high stakes on their experiences online. It is how they interact with the world. It’s keyed into their self-worth and their livelihoods, for some. You want to sell online, get your shit together.

They have little to no tolerance for anything untoward. 80% of Gen Zers reported that they are willing to try new brands since the pandemic. Brand loyalty, based on in-person interaction, is almost a thing of the past. When brands are moved from around the world at the touch of your fingertips there’s nothing to stop you. If a company screws up an order, or doesn’t get back to you? Why should you stick with them? When it comes to these issues, 38% of Gen Zers say they only give a brand 1 second chance to fix things. Three-quarters of the surveyed responded saying that they’ll gladly find another retailer if the store is just out of stock.

This study goes even further though and discusses not just those interactions but also the platforms themselves. If a website isn’t easy to navigate, why should I use it? Why should I spend my time when I can flit to another and get exactly what I need instead of getting frustrated? There isn’t a single company in the world that shouldn’t take their webpage development seriously. It’s the new face of their company and brand. How they show that face is what will determine if they are a Rembrandt or a toddlers noodle art.

The new age of online shopping has been blasted into the atmosphere by the pandemic. Online shopping has boosted far and above expected numbers for obvious reasons. When the majority of your populace is told to stay home. What else are they going to do? Brands that have been around for decades have gone out of business because they didn’t change to an online format either. Keep moving forward.

Now as a side note here, as someone who falls only just outside the Gen Z zone the articles description of fickle is pompous. The stories I’ve heard of baby boomers getting waiters fired, or boycotting stores because of a certain shopkeeper are just as fickle and pointed. Nothing has changed in the people, just how they interact with the world. Trying to single out a single generation based on how the world has changed is a shallow view of the world.

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Business News

Chasing Clubhouse success? How the audio chat room trend affects products

(BUSINESS NEWS) It is inevitable that when a new successful trend comes along, other companies will try to make lightning strike twice. Will the audio chat room catch on?

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Smiling woman seated in dark room illuminated by lamp and phone light, participating in audio chat room.

Businesses are always about the hot new thing. People are the always looking for the easiest dollar with the least amount of effort these days. It tends to lead to products that are shoddy and horribly maintained with the least amount of flexibility in pleasing their customers. However, you also have to look at the customer base for this as well. You follow where the money is because that’s where its being spent. It’s like a merry-go-round, constantly chasing the next thing. And the latest of these is the audio chat room.

During the pandemic the entire world saw an eruption of social audio investments. Silicon Valley has gone crazy with this new endeavor. On the 18th of April this year, Clubhouse said it closed on some new funding, which was valued at $4 billion for a live audio app. This thing is still in beta without a single penny of revenue!

The list of other companies who have pursued new audio suites (either through purchase or creation) include:

  • Facebook
  • Spotify
  • Twitter
  • Discord
  • Apple

This whole new audio fad is still in its infancy. These social media and tech giants are all jumping headlong into it with who knows how much forethought. A number of them have their own issues to deal with, but they’ve put things aside to try and grab these audio chat room coattails that are running by. It’s a mix of feelings about the situation honestly. They are trying to survive and keep their customers.

If a competitor creates this new capability and they stay stagnant then they lose customers. If they do this however without dealing with their current issues then they could also lose people. It’s an interesting catch 22 for people out there. Which group do you fall in? Are you antsy for a new toy or are you waiting for one of these lovely sites to fix a problem? It’s another day in capitalism.

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