The coronavirus pandemic has had a profound impact on the retail industry. Forced temporary closures early in 2020 and operating restrictions created a serious revenue crunch for a large number of businesses, some of which are still attempting to recover. In fact, Coresight Research tracked store closures last year and found a whopping 8,741 shuttered in the course of the year. And now, it's predicting that as many as 10,000 additional stores could close by the time 2021 draws to a close.
The bleeding just won't stop
Store closures were a problem before the pandemic began, but in the wake of the coronavirus outbreak, they exploded. Not only have smaller stores shuttered over the past 11 months, but a number of well-known department stores have closed locations or made plans to do so.
All of this is terrible news for malls. This type of commercial real estate relies on retailers to pay rent. Of course, losing department stores is an exceptionally harsh blow for malls, since those tend to serve as anchor tenants, taking up multiple floors of space and drawing in smaller tenants as well as customers. And while things will hopefully improve regarding the coronavirus outbreak once vaccines become more widely available, that's unlikely to happen in the next few months, which means that by the time the majority of the public is inoculated, the damage may already be done.
Digital sales are driving the trend
These days, many consumers are staying away from physical stores or limiting the amount of time they spend shopping in person due to safety concerns. But they're not necessarily cutting back on spending. Rather, they're shifting to online purchases -- a trend that really took off during the 2020 holiday season. In fact, 40% of consumers say they plan to shop for apparel in physical stores at their current rate or less after being vaccinated, according to First Insight. As such, widespread vaccines may not do much to save retailers from having to shutter locations.
Online sales are of course good for retailers, because they serve the important purpose of pumping revenue into companies that need it. But from a store closure perspective, they're not all that helpful. In fact, if more retailers continue to have success with digital sales, they may actively look to close stores as a means of cost savings. It's generally cheaper to ship goods from warehouses than to maintain and staff customer-facing locations.
Malls may need to get creative
If store closures pick up this year as Coresight predicts, mall operators may need to really start thinking outside the box to avoid going bankrupt themselves. Some malls are already welcoming nonretail tenants by signing lease agreements with doctors' offices and health clinics. Others are using empty space to open schools. At this point, malls that want to thrive will need to expand their horizons if they want to survive the retail apocalypse -- an event that seems all the more imminent with each month that passes.