In case you hadn’t noticed there has been an oversized steamroller destroying everything in its retail path, paving its way to be the future largest retailer in the world. Yes, that would be Amazon.com, Inc. (AMZN).
The rise of Amazon, as well as other ecommerce retailers, has been bad news for brick-and-mortar retailers including large retailers that were too late to build their online presence. The longer they waited, the more ground they had to make up, which led to market share losses. The easiest way for brick-and-mortar retailers to stay afloat is to slash headcount, but they’re still going to be fighting an uphill battle. The popular retailers listed below planning layoffs might surprise you. Fortunately, there's also some good news. (For more, see: Who are Amazon's (AMZN) Main Competitors?)
The rise of technology, especially the consistently increasing using of mobile devices, has led to increased ecommerce shopping. Many consumers see no need to go to the mall when they can order what they want with the click of a button. This frees up time and in many cases, they will find a better deal online. The only way the brick-and-mortar retailers can compete is to offer promotions, but this shrinks margins. Physical retailers are left with declining sales and margin pressure, the latter of which leads to lower profits. This, in turn, leads to cutting costs which means laying off workers. And according to Credit Suisse, retail layoffs are on pace to be considerably higher in 2016 than they have been in years reaching 37,000 up from 30,273 in 2010.
Shrinking and Growing
Sears and Macy’s have been popular mall anchor stores for decades, but according to Green Street Advisors there will be 800 department store closures this year, with would represent 25% of anchor stores in malls. Obviously, Millennials aren’t as interested in going to the mall to shop at Macy’s and Sears as previous generations. But they are interested in fitness and new technologies. This is why many malls are starting to change their anchor stores to fitness centers and technology-based showrooms. You will also see more Tesla Motors, Inc. (TSLA) in malls, though not as anchor stores.
While there is a negative trend taking place and layoffs are terrible, it’s not all bad news. There is also a positive trend that’s in its early stages and it could lead to future job creation opportunities. (For more, see: Analyzing Retail Stocks.)