Economists' Outlook

Housing stats and analysis from NAR's research experts.

Weekly Retail Update: January 29, 2021

Multiple retail research and advisory groups forecast record-high retail store closures in the U.S. in 2020, up to 25,000, as a result of the coronavirus pandemic. But permanent retail store closures did not reach the estimated amount. Coresight Research tallied 5,524 closures in 2018. Store closures increased to a record high, 9,350 in 2019 before falling to 8,736 in 2020.

Line graph: Retail Store Closures, 2015 through January 2021

So why didn't more retail stores permanently shutter in 2020? While a thorough answer is beyond the scope of this article, before responding to the question, some context is needed as it pertains to the substantially high, estimated retail store closure figure. The high estimates of store closures were the result of the unprecedented impacts on consumers and retailers. Many research firms and retailers were attempting to assess the impacts of the millions of retailers whom were forced to permanently close their doors or operate under limited capacity and job losses, in addition to analyzing the impact of lockdowns on consumer behavior and its cumulative effect on U.S. retail sales. It is understandable why many approached the coronavirus impact on retail with such despondence, especially considering many of the retail industry's problems were not new such as weak retail balance sheets and an over-retailed United States.

Now that there is some understanding with respect to the pessimism towards the impact of the coronavirus on retail stores, the reasoning as to why store closures in 2020 weren't as high as forecasted can be found in retailers' extraordinary measures, consumer spending, and e-commerce.

Many retailers with minimal to non-existent revenue chose to withhold rent, pay reduced rent, or struck deals with landlords to stay open longer with the hopes of generating revenue. On the consumer side, households changed consumer spending habits by saving money, reallocating capital, and shopping online, all of which was aided by economic stimulus payments and other programs and benefits.

Line graph: Montly Nonstore Retailers, January 2015 to November 2020

While more consumers are shopping online, e-commerce was growing prior to COVID-19 and was accelerated as a result. The acceleration of e-commerce benefitted those retailers who already had an online presence and those who were able to adopt an omnichannel approach. This trend continued throughout the elongated holiday shopping season. The October-December holiday shopping season saw non-store retailers grow substantially at 24% year-over-year against the same period the year before. December alone saw non-store retail sales up 19.2% year-over-year. But not every retailer was fortunate enough to benefit from the rise in e-commerce.

Those retailers that could not and did not adopt an omnichannel approach were hurt, especially restaurants and apparel retailers. Many retailers were hoping sales in their brick-and-mortar locations would keep them afloat and that they would get some relief at the beginning of the new year. But that may not be the scenario as retail purchase volume typically falls off a cliff after Christmas and what remains are the expenses, sans the purchase volume.

While many retailers were able to cope with the disruption in an unprecedented year, we have tracked 40 major U.S. retailers that have filed for bankruptcy in 2020, which is up from 17 in 2019.

Furthermore, we expect that some retail store closures have been prolonged as many will be clothing chains and department stores who have had dramatic year-over-year losses throughout the pandemic. In December alone, department stores recorded the largest decrease among all industries with a 21.4% decrease year-over-year. We anticipate that some of the retail struggles of 2020 will carry over into the new year, whereas of January 28, 2021, Coresight Research indicates 2,145 retail closures. To provide some context, this retail closure figure was not reached until the second week of April in 2020.

With many retailers relying on a good holiday season, although not all, many are holding off on listening to offers for their stores. In any event, January is typically the month where retailers plan their store footprint for the remainder of the year. So retailers that have been behind the curve in constructing online and omnichannel capabilities may be announcing store closures and bankruptcies soon as they formulate plans for their respective brand(s). But all is not bad. Many of the retailers who were able to handle the disruption of the pandemic will have an opportunity to grow and many new retailers have opened since the beginning of 2021. Coresight Research has tracked more than 1,940 retail openings as of the time of this article, and with the vaccine rolling out, should COVID cases decrease, retail foot traffic and brick-and-mortar retail sales may pick back up, which will attenuate some pressure off of the retail industry.