Over-Retailed Nation: Sears to Shutter At Least 100 Stores

After an apparently very disappointing holiday sales season, Sears has announced it will close 100 to 120 Sears and Kmart stores. Sales at stores open at least one year dropped 5.2% in the last two months.

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One easy-to-blame culprit is e-commerce.

Like many other brick-and-mortar big box retailers–Best Buy comes to mind here–Sears has become a de facto showroom for online retailers such as Amazon, which use the best of mobile and social media technologies to lure shoppers to their sites.  Consumers, essentially, go the stores to check out the products in person, but then go online to make their actual purchases.

At least that is what one grasps reading between the lines of Sears’ announcement this morning:

“Kmart’s quarter-to-date comparable store sales decline reflects decreases in the consumer electronics and apparel categories and lower layaway sales. Sears Domestic’s quarter-to-date sales decline was primarily driven by the consumer electronics and home appliance categories, with more than half of the decline in Sears Domestic occurring in consumer electronics.”

Consumer electronics, it hardly needs to be said, is a top seller of online retailers.

Still, it is not accurate to lay the entire blame for Sears’ woes on ecommerce trends, which incidentally haven’t hurt every retailer, at least not significantly—Wal-Mart being a case in point.

Store Closing Still A Regular Occurrence

In short, even as the economy improves store closings are still happening with depressing regularity and no amount of clever online merchandising can fully mitigate this.

Q3 figures from International Council of Shopping Centers show that over 800 retail and restaurant establishments announced they would be closing, versus only about 500 in the same quarter of 2010. The number of store-closing announcements in Q3 increased by a significant 75.9% compared with the same quarter of the prior year.

These stores represented approximately 12 million square feet, accounting for 0.3% of the total inventory of retail space within the United States, a 64% increase from the third quarter of 2010.

Other stats:

• On a year-over-year basis, GAFO-type (general merchandise, apparel, furniture and other) store-closing announcements increased by 131.6% in Q3. However, a majority of the announcements came from only a handful of retailers.

• Books and footwear retailers announced 763 store closings in the third quarter, which represented 88% of all quarterly announcements in the third quarter 2011 tally.

Over-Retailed Nation

There are other factors to consider.

Mish’s Global Economic Trend Analysis blog recently pointed out that many experts believe that the number of retail establishments per capita in the United States was excessive even before the economy recessed. He notes that there were 1,122,703 retail establishments in the United States and a total of 14.2 billion square feet of retail space, according to the 2007 Economic Census.

This translates into 46.6 square feet of retail space per capita in the U.S.  In India, that ratio is 2 square feet per capital, in Mexico, it is 1.5 SF. In the U.K. and Canada, 23 SF and 13 SF, respectively.

“It seems to me stores have a major problem here,” Mike Shedlock, who writes the blog, concluded. “The problem is increasing competition for customers who have no job and/or retirees with little need for anything but food and shelter.”