Retail Crisis In U.S., U.K. A Fizzle For 2020?

Call it a crisis that crosses the pond, will last into 2020 and, likely, beyond.

Looking past the cheerful numbers tied to holiday shopping and the tens of billions of dollars spent on Black Friday, Cyber Monday and into Christmas, the decline of retail, at least the traditional retail model, continues into the new year, and across oceans.

Consider the fact that in the United Kingdom, as many as 16,000 retail locations have been shuttered, and the sector has lost 140,000 positions. That’s the worst reading in decades. And, per data from the Centre for the Retail Research, the job losses could continue, without government intervention, to the tune of 171,000 positions this year. A big reason for the layoffs stems from the continued shift to eCommerce, as stores close, and as some companies simply vanish in the U.K.

The retail sector is among the largest employers in the U.K., and as noted in this space last week, nearly 12 percent of stores there are vacant.

A bit closer to home, 2019 marked a record year in the U.S. — the kind that many firms that depend on brick and mortar would rather forget. More than 9,300 stores went dark, and among them were locations operated by marquee names, such as Sears, Party City and Payless. The rate of closings was up nearly 60 percent year over year, as estimated by Coresight Research. The number of bankruptcies also was up, to 23 from 17 in the prior year, marked by the aforementioned Payless, Gymboree, Forever 21 and others.

The closures have come despite the continuing willingness of the U.S. consumer to spend, and they highlight a shift toward omnichannel experiences. These retailers — the surviving ones, of course — are in for an even rockier road if an economic downturn materializes. We usually cheer the dawn of a new year as a chance to start things anew — but here, at least, 2020 may simply offer more of the same.

Sizzle

National Returns Day: The dawn of the new year heralds a spike in returns of unwanted gifts. According to stats, Jan. 2 is likely to go down in the record books with a 26 percent spike in gifts sent back to retailers. The preliminary numbers from UPS count on 1.9 million packages making their way back to retailers.

Digital Loan Applications: Banks continue to shy away from providing loans to small and medium-sized businesses (SMBs). But online lending companies are seeing a surge in digital loans — up 19 percent year over year in 2019.

Wages: Small business employees are seeing gains in their paychecks, with a gain in 2019 of 4.1 percent year over year, quickening its pace into the end of the year. The leisure and hospitality sector saw the largest boost in earnings, as measured by vertical, up 5 percent year over year.

Fizzle

Libra: Might it be the case that the prospects for Libra continue to dim? Jens Weidmann, European Central Bank policymaker, has advocated that banks within the region find alternatives to Facebook’s cryptocurrency.

Auto Sales: Vehicle sales in 2019 were the lowest in five years — although still healthy as U.S. consumers spent $462 billion. The fizzle may lie ahead, as some analysts see pressures looming in the form of high non-housing debt and rising defaults.

Big Tech: Some of the most dominant players within tech continue to face regulatory scrutiny. As 2019 ended, Russian authorities put legislation in place that requires all devices (such as from Apple, Google and Samsung) to have preinstalled Russian software effective July 1. In addition, Italy said as of the start of 2020, it will levy a 3 percent tax on digital revenues for larger tech companies.