Everything That Happens When Retailers Close
If you’ve been following the news at all, then you already know that brick and mortar retailers are filing for bankruptcy and shuttering their doors left and right. But what they don’t tell you is what happens when a national retailer or a small, family owned store is forced to shut down.
What happens to the merchandise? What happens to the building? Can you really get good deals, or are stores just faking sales in a last-ditch effort to make a little money? The answers to these questions may surprise you, including the best time to shop for sale items (page four).
1. Retailers are closing at a rapid pace
More than 20 big-name retailers filed for bankruptcy in 2017 and countless smaller stores took similar hits. “Last year was an all-time record in store closings with about 7,000 store closures. That’s up more than 200% from a year ago,” Fabienne T. Cadet, Ph.D., assistant professor of marketing at St. John’s University’s Peter J. Tobin College of Business told DealNews. Not even Target is immune from the reality of store closures; they closed at least 12 locations at the end of last year.
Online shopping is partially to blame — while brick and mortar retailers suffer, Amazon’s profits continue to soar as consumers choose to stay home and skip the shopping malls.
Next: Here’s the reason it’s tricky to predict liquidation tactics.
2. Liquidation sales are different for every store
Ever hear of a store closing consultant? They’re the people who help stores liquidate inventory. Jerry Robertson told DealNews that the process varies. “Since there are different owners for each, there is no set of blueprints. I set most of the pricing to start at 13% and eventually it gets to 80% off,” he said.
Next: This has to happen before the sales.
3. Store owners have to prep for the sales
Before the sales and final closing procedures can take place, store owners need to make a plan for how long the sales should go on before closing their doors for good. Then they need to inform the public and the store employees of their intentions and then start advertising the sales.
Next: Getting the best deals depends on this one thing.
4. It can be tricky deciding when to shop
One huge benefit to discount-seeking shoppers is that store closing sales are a great time to save money. But deciding the best time to get great deals isn’t as easy as it sounds.
Typically, deep discounts are staggered over the final weeks, with the biggest discounts happening in the final days. If you have your eye on big ticket items, like tools or appliances, then it’s best to visit the store in the early days even though the savings won’t be as dramatic. Those types of items sell quickly even if they’re not deeply discounted.
Next: Not everything sells — here’s where it goes.
5. There’s usually leftover merchandise
Even after a 90% off sale, not everything gets purchased. Any leftovers usually get donated to charities or are sold for a loss to discount stores.
Next: Going out of business is a catch-all phrase.
6. Not all chains close every store
Declaring bankruptcy, closing underperforming stores, and going out of business aren’t the same thing and the process looks different depending on what’s going on.
When a store files for bankruptcy protection, the owners will usually take the opportunity to close locations that aren’t profitable. That’s what’s happening to the majority of suffering retailers today such as Macy’s and other department stores.
Occasionally stores will go out of business and close all locations, which is what happened with Toys “R” Us in 2018 (they closed all their United States stores but continue to operate in Canada).
Next: No, you can’t stop paying your bills.
7. You still have to pay your credit accounts
If you have a credit account with a failing retailer, then you better use your reward points long before they officially go out of business. All of those perks disappear when the store goes under.
Of course, you’ll still have to pay any balances on the credit account even if the store closes. The debt is usually purchased by other entities and remains on your credit report. It will show as a closed account once the remaining balance is paid.
Next: Here’s the worst thing stores do when they close.
8. Customers and employees may suffer
Not all companies announce their intentions of closing. In some cases, retailers abruptly close up and leave town without even notifying their employees. The people scheduled to work show up for their shift only to find locked doors.
This can even happen with large stores. In 2017, Alfred Angelo filed for bankruptcy and left thousands of brides scrambling to purchase new wedding gowns in advance of their big day.
Next: You might be surprised when these things are for sale.
9. You can even purchase fixtures
You can find way more than just regular merchandise during a store closing sale. Closing retailers typically sell everything, including hanging hooks, shelving units, display cases, mannequins, and just about anything that isn’t nailed down.
Next: This is how closed stores ruin towns.
10. The buildings may become eyesores
After the store leaves, the building is often left empty, which can cause future problems for towns and cities. Without new tenants to take the space, the structure can become rundown and blighted. There are thousands of square feet of creepy abandoned malls across the country.
Next: This is one surprising downfall of failed stores.
11. Failing stores spur more failures
One reason that malls are suffering so badly? These former shopping destinations used to rely on “anchor stores” to drive traffic, and all the smaller stores would benefit from customers to came to shop at these big-name stores department stores like Sears and Macy’s.
Now that people have abandoned those larger stores, the smaller retail spots inside the malls fail too.
Next: You might be surprised to see malls now.
12. Cities are coming up with creative solutions
One reason that people aren’t shopping at brick and mortar stores like they used to is they’d rather focus on experiences rather than possessions. Taking that trend into consideration, cities are converting former malls into entertainment spaces rather than retail locations. They’re hoping to drive people back — just not for shopping.
In Michigan, a former four-story Macy’s was transformed into storage units. The other obvious option for vacant building is to just tear them down.
Next: Don’t hate Amazon.
13. It’s not just Amazon to blame
Online shopping emporiums like Amazon are partially to blame for the slow death of brick and mortar stores — but they’re not the only reason that so many stores are failing. Part of the proof? Discount stores like Ross and TJ Maxx are steadily growing thanks to their pricing model. Department stores failed to adapt … and now they’re just failing.
Next: The future of retail is uncertain.
14. Stores are trying to keep up
It’s not like struggling retailers are just giving up without a fight. Desperate to stay afloat, these store owners are bringing in analysts and completely rethinking their business models in hopes of bringing back old customers and attracting new ones.
Next: Don’t expect failures to stop anytime soon.
15. More stores will close in the next ten years
Barnes & Noble, Macy’s, JC Penney — many formerly popular retailers are in danger of going extinct in the next ten years if they don’t make some serious changes quickly. These stores are now focusing on online business and closing costly brick and mortar locations as mall foot traffic steadily decline. Still, even with these changes, there will still be more closures in the coming decade.
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