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Store closures slowed in 2021 as retailers got creative, seized cheaper rents


A Dollar General store in Creve Coeur, Illinois.

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WayfairSees an opportunity to make a crucial move.

Next year, the furniture and home goods retailer will open three new stores in Massachusetts. Bob Sherwin, Chief Marketing Officer, said that low rents are a major draw. However, customers also need to feel and touch its products as well as a desire for brand recognition.

Sherwin stated, “We know that our customers enjoy shopping online but also like to interact in person.”

Many people used to think it was impossible for bulky furniture like patio furniture and office chairs, but that wasn’t so long ago. Wayfair saw a 55% increase in sales between 2019 and $14.1 billion for 2020. It was driven by customers looking to update their homes. the coronavirus pandemic. However, the last quarter was a success. Wayfair’s quarterly sales have fallen year over yearAs the company reaped these huge profits,

Wayfair doesn’t have stores, except for pop-up shops. It’s now part of a growing number of retailers who sell direct to consumers and use stores to connect with new customers, hopefully increasing profits.

This isn’t an exclusive retailer looking at their stores in a different way. Dollar GeneralAnd Dick’s Sporting GoodsNew store formats are being tested by the company to appeal to consumers who don’t normally shop for their brand. Operator of department stores Macy’sEven reversed its previous decision to close shops. This activity shows that shops are important.

Coresight Research’s tracking shows that for the first time, announcements about store openings have exceeded those of store closings. As of last Friday, Coresight counted 5,083 openings announced by retailers this year, and 5,079 closures — the fewest in five years.

Deborah Weinswig is the chief executive officer at Coresight. Coresight is a global advisory and research firm. We’re only in the beginning stages of all this.

“It has really come full circle”

A large number of shop closures in 2020 may have contributed to the shift. Experts say that many retailers saw the pandemic in 2020 as an opportunity for them to sell their underperforming assets. This led to a series of closing announcements.

James Cook from JLL Americas Director of Retail Research, stated that “we had a lot bad bankruptcies” and closings.

Cook said that many portfolios were right-sized as a result. Cook said, “And now, I believe we’ll see a return of organic growth.”

Companies like Dollar General are not the only ones that can do this. Dollar Tree, Five Below, Tractor SupplyAnd BurlingtonAre opening up new locations by the dozens — if not hundreds — there’s another group of retailers plotting growth that’s just as important, albeit on a smaller scale.

Rebecca Fitts, director of real estate at Leap and former real estate director at Warby ParkerAccording to a report by e-commerce company Direct-to-Consumer, there is a greater demand for brick-and mortar locations. Glossier makes make-up, while Outdoor Voices produces apparel for athletes. This group of retailers avoids working with wholesalers or department stores.

Fitts said, “It has really come full circle.” Fitts said, “It was shot from a cannon last year.”

Shopping at a mostly-empty mall in Columbus Ohio.

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LeapTo fill empty stores in shopping malls, Aurate teams up with retailers like Mack Weldon’s men’s clothing brand, Mack Weldon’s women’s wear line, and Naadam cashmere chain. Simon Property GroupAnd MacerichYou can also find other useful information at

The second quarter saw mall vacancy rates rise to 7.2%, up from 4.9% during the first quarter in 2020. That was prior to the outbreak that resulted in massive store closings. JLL reported that vacancy rates for C-rated lower-tier malls (which bring in less sales per square footage than A- or B-rated malls) were 12.4% in the second quarter.

Fitts says that online retailers want to open new stores in order to increase sales and make a profit.

She said that there will be a time when people won’t want to shop online and it’s this point where they’ll stop going further. This is an important, large part of the market.

Look for opportunities to grow your business.

Warby Parker, a sustainable shoe manufacturer and eyeglass maker, has launched Warby Parker Eyewear. AllbirdsHere are two. Each company is losing money and went public in recent years. Both companies are losing money. plotting significant store expansion. Allbirds had 31 locations as of Sept. 30 and has said it has only “scratched the surface” with stores. Warby Parker expects to finish the fiscal year in 161 locations. It also believes it could grow to more that 900 stores over time. Investors can watch the progress of the strategy as both brands are in the spotlight.

Warby Parker founder and CEO Dave Gilboa said in November to analysts that his stores are “highly productive.” He stated that each location returns its investments in under 20 months.

Warby Parker’s conference, he explained that “we deliberately designed our stores to act as billboards” first quarterly earnings callPublic company.

Gilboa stated that Warby Parker aims to achieve an average of $2,900 per square foot at every location.

“Highest margin channel we have”

One customer attempts on glasses in a Warby Parker shop in Los Angeles.

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Brands that are direct to consumers may discover stores becoming more lucrative as there is a greater number of outlets.

RhoneA men’s online activewear company, Rhone signed a lease for Fifth Avenue in Manhattan in February 2020. Rhone was due to open its flagship store there in February 2020. Rhone also had to temporarily shut down last year. It said that it had opened four additional stores in 2021 thanks to low rents, increasing its total to seven.

Rhone’s co-founder and CEO Nate Checketts said that the market for real estate is getting more competitive. But, Rhone won’t slow down its plans to open more stores in 2022.

Checketts said that managing five stores is easier than running one. My guess is that it will be simpler to manage 10 stores than five.

The store’s economics improve when overhead costs are distributed over several locations. This is the best channel for us to make the most of our margins.

In the United States, there have been approximately 41,000 commercial leases of retail space signed during the first half 2021. That’s a total area of 121 million square footage, according JLL.

JLL reported that net absorption (or the move-ins of retailers) increased by 80.4% over the previous year to 32.2 Million Square Feet in the third quarter. This is the largest net absorption figure JLL has ever tracked over a 3-month period, since 2017.

Strategic stores

Coresight data shows that retailers closed an astounding 18,583 stores in 2019 and 2020. One expert believes we will never again see such large numbers.

“The days of these mass closings by retailers — like a blanket — I think they’re over,” said Brandon Isner, head of Americas retail research at CBRE.

He said that companies are now more informed about the location of their stores thanks to the internet. The internet allows retailers to gather data and determine core markets for existing customers or potential ones, so they can decide where it makes sense to open a shop. “It’s harder for [retailers]He said, “Don’t be fooled.”

According to Isner, brick-and mortar locations are just as important as, or even more valuable, than a billboard. He also said that the function of stores has changed.

Isner said, “Stores don’t just have to be places for things that hang on hooks.” “They’re showrooms. These are places you can go to for information about the brand. These centers are also fulfillment centers. They’re also a location where you can sell products [stores]Can help alleviate that burden, the e-commerce burden.”

Many retailers say there are synergies between their stores and websites — each helps the other.

There are plans to pause

An indoor mall that houses Macy’s department store locations.

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Macy’s has, for instance, put dozens of planned store closures on pauseThe department store chain stated that its digital performance was better in those markets where there’s a physical presence.

It’s about discovering. It’s all about convenience. In an interview Marc Mastronardi (Macy’s chief store officer), stated that it’s all about service and engagement. In addition to meeting the needs of existing customers, [stores]We have great chances to retain customers.”

Macy’s is going to have to test this method next year. Macy’s has already been notified. hired consulting group AlixPartnersJana Partners has submitted a proposal to Macy’s, which had previously pressured the retailer to separate its e-commerce and physical stores. Jana wants to see the greater valuation likely given to as a separate digital business.

Jeff Gennette, Macy’s chief executive officer, told analysts last month the company values pure ecommerce companies. He said that Macy plans to provide an update once AlixPartners’ review has been completed.

This is all part of an even bigger trend. Saks Fifth Avenue split off its online operations from its stores armThere was an earlier announcement in this area. will likely go public in 2022. Kohl’sActivism groups are putting pressure on a number of activists to stop allowing sex. Engine Capital to consider a similar breakup. Also NordstromAlixPartners also appears to be working with him review a potential spinoff of its off-price Rack business.

Macy’s is still exploring different store formats. Macy’s Market by Macy’s, its latest off-mall store format is smaller than typical department stores. Macy’s has also tested a new small format Bloomingdale’s store. Bloomie’s.

“This is an opportunity for us to expand our footprint and attract a more diverse consumer base — a younger consumer base,” said Mastronardi. Macy’s does not yet have sales data for these stores, however it said that its early successes were encouraging.

For the latest Dollar General’s or Dick’s Sporting Goods’ efforts, it’s still early. This dollar chain is targeting a more wealthy customer, who likes to shop for bargains. a new store concept called Popshelf. Dollar General will have around 1,000 Popshelf outlets by the end fiscal 2025. Dick’s Sporting Goods has big plans for its new location House of Sport shopsThere is a climbing wall in the indoor and an outdoor track and field.

Bonobos, an online retailer of men’s wear, opened outlet shops during the pandemic.

CEO Micky Onvural said the retailer opened its first two outlet locations — at Woodbury Common Premium Outlets in New York and Citadel Outlets in Los Angeles — to offload outdated merchandise at a discount, when it ended up with piles of clothing that needed to be sold. She said that four traditional Bonobos shops had been closed due to rising rents.

It is clear that the rents in some retail markets have not fallen since the pandemic. JLL and CoStar have found that retail rents in San Francisco fell by 5.5% from the beginning of 2020 to the end of the third quarter. JLL, CoStar and Orlando rents have increased by 7.5% and 4.1% respectively over that same time period.

There are certain markets in which we’ve been able get better deals. Onvural said that there are markets in which we don’t have the best deals. When deciding on the best way to spend our money, we must take this into account.

Telsey Advisory Group Chief Executive Officer and Chief Research Officer Dana Telsey went to Las Vegas earlier this month for a conference hosted by ICSC. This trade association represents the retail real estate industry. It brings together tenants, landlords, and brokers. Telsey described that there was a positive tone and a lot of optimism. Discussions revolved around the growth plans for online retailers in 2022 as well as traditional retailers’ attempts to expand their stores into new areas.

Telsey explained that “the industry has overcome significant headwinds such as the many bankruptcies and closing of large stores” which created uncertainty. Now it is healthier. Tenants are opening shops all the time.