The Real Reason So Many Mall Department Stores Are Closing
Shutterstock By Hope Ngo/May 27, 2021 10:25 pm EST
As vaccination rates rise, and infection rates fall, many of us may be aching to go outside and pick up where we left off more than a year ago. Yet, as businesses start to reopen, we may discover that the world that we’re returning to isn’t exactly the same world as the one we left behind — and this is especially true of our favorite malls and their anchor department stores.
Since February of last year, we’ve seen many of our favorite retail brands file for bankruptcy — including Brooks Brothers, Lane Bryant, J.Crew, and L’Occitaine (via NBC). But as CB Insights points out, department stores are at bigger risk, because they went into the pandemic already crippled by the decline in foot traffic, the rise of online shopping as well as the presence of sizable corporate debt in their books. These former department store giants include Neiman Marcus, Lord and Taylor, JCPenney,and New York’s iconic Century 21.
The Real Reason So Many Mall Department Stores Are Closing
Shutterstock
By Hope Ngo/May 27, 2021 10:25 pm EST
As vaccination rates rise, and infection rates fall, many of us may be aching to go outside and pick up where we left off more than a year ago. Yet, as businesses start to reopen, we may discover that the world that we’re returning to isn’t exactly the same world as the one we left behind — and this is especially true of our favorite malls and their anchor department stores.
Since February of last year, we’ve seen many of our favorite retail brands file for bankruptcy — including Brooks Brothers, Lane Bryant, J.Crew, and L’Occitaine (via NBC). But as CB Insights points out, department stores are at bigger risk, because they went into the pandemic already crippled by the decline in foot traffic, the rise of online shopping as well as the presence of sizable corporate debt in their books. These former department store giants include Neiman Marcus, Lord and Taylor, JCPenney,and New York’s iconic Century 21.
Since February of last year, we’ve seen many of our favorite retail brands file for bankruptcy — including Brooks Brothers, Lane Bryant, J.Crew, and L’Occitaine (via NBC). But as CB Insights points out, department stores are at bigger risk, because they went into the pandemic already crippled by the decline in foot traffic, the rise of online shopping as well as the presence of sizable corporate debt in their books. These former department store giants include Neiman Marcus, Lord and Taylor, JCPenney,and New York’s iconic Century 21.
Department store woes began long before the pandemic
In one sense, asking these firms for a bailout made sense because, as analyst Philip Emma told Retail Dive in 2018, these institutional investors brought something to the table. “You have some firms that specialize in certain industries because they’ve done those deals, and they know the companies and they know the industry,” he said. As a result, store management were likely to hear pitches from big investors that outlined their experience in owning retailers, including knowing landlords, distributors and suppliers.
Retailers entered a Faustian deal with private equity firms
As Duke University School of Law’s Elisabeth de Fonteney explained, “Much of the difficulty that the retail sector is experiencing has been aggravated by private equity involvement. To keep up with everybody’s switch to online purchasing, there really needed to be some big capital investments and changes made, and because these companies were so debt strapped when acquired by private equity firms, they didn’t have capital to make these big shifts.”
The impact of losing a department store is significant for a mall
The retail apocalypse is far from over, but when it is, surviving department stores are going to be different from the way we knew them to be. What shape that takes will be something we will find out soon enough.
