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Fast fashion retailers are closing their stores, shrinking global retail

By Don-Alvin Adegeest

Mar 16, 2021

The annus horribilis for global retailers in the fashion industry is yet to end. Covid-19 has been an ongoing catalyst for transformation and at worst had a Darwinian effect, spurring an international reduction of physical shops. According to Modaes, Spain’s economic fashion news outlet, an estimate of closures from three large players including Inditex, H&M and Gap, could be telling for the market at large. Where a cumulative reduction in stores could spell 1,400 closures for these three, the reality could see a much higher number of outlets permanently shuttered.

Inditex to close 1,200 stores

Last June Inditex announced its restructuring plans stating a divestment of up to 1,200 stores worldwide, mainly in Asia and Europe (along with 450 openings) between 2020 and 2021. The aim was to create a “more agile and sustainable” integrated network. The plan is already in full swing with the news of the closure of nearly 100 physical stores of Bershka, Pull & Bear and Stradivarius in China, where the group is ready to bet only on their e-commerce presence.

In restructuring, H&M will close 350 stores

In October, H&M announced a quarter of its 5,000 physical stores have leases expiring or to be renegotiated, leading to at least 1,250 stores. Estimates are H&M will close 350 stores, against 100 openings, thus bringing a net decrease of about 250 stores. The decision to accelerate the restructuring plans of its network came as a result of lockdowns and a boost in online sales, leading the Swedish group to increase its commitment to omnichannel integration and digital investments.

In the U.S. Gap said it would shutter up to 350 Gap and Banana Republic stores in North America by 2023. In Europe the company is planning the transfer at least part of its 120 store portfolio into franchise or other formats.

America’s malls at risk of bankruptcy

In the U.S., Coresight estimated in July that 25 percent of America’s 1,200 malls were at risk of bankruptcy due to adjustments by large groups and insolvencies during the period of closure. The pandemic spurred the retail pocalypse phenomenon, which describes the retail crisis caught in a perfect storm with other elements: the emergence of pure players like Amazon; changes in consumption habits; maturities of the large debts of the retail sector and of the promoters of shopping centers.

Last year America’s beloved department store Macy’s said it would further reduce its retail perimeter and is studying new store models to survive the competition from e-commerce. Macy’s said it would close 125 stores over the next three years, of which 29 will already be decommissioned this year.

While apparel and department stores have struggled from the onset of the pandemic and are approaching the upcoming year with a higher priority around cost-cutting, Deloitte in its 2021 retail outlook said executives are “not going to let this crisis go to waste. It may be a once-in-a-lifetime opportunity for organizations to transform their businesses and rewrite the rules of the industry.”

Image: Shopping Mall via Pexels. Article source: Modaes