NEW YORK – According to research from BDO – an international network of business advisory firms – 2020 is likely to set the record for the highest number of retail bankruptcies and store closures in a single year.
The BDO report shows that the COVID-19 pandemic has greatly accelerated the rate of retail bankruptcies with 18 retailers filing for Chapter 11 bankruptcy in the first half of 2020 alone. In the home category, Art Van Furniture is the only full-line home furnishings retailer to declare bankruptcy this year, according to the report. The others in the category listed as filing Chapter 11 are Pier One, Sur La Table, Olde Time Pottery and Tuesday Morning.
Individual store closures have also climbed, with almost 10,000 store closings through mid-August. With a current 29 bankruptcy filings in 2020, this year is on-pace to rival 2010, following the Great Recession, which resulted in 48 total bankruptcy filings.
“Retailers need to reflect on the challenges faced in the first part of the year, focus on new product categories, and double down on digital- and hygiene-centric trends in the lead-up to the holiday season,” said David Berliner, partner at BDO New York.
Bed Bath & Beyond leads the home category in store closures with 200 announced for this year, and Macy’s department store has also announced the closing of more than 50 stores.
The research revealed that the majority of store closures have taken place in malls, which have seen far less foot traffic due to sustained COVID-19 disruption.
“Shifting consumer spending habits driven by the pandemic have added pressure for retailers to minimize their physical footprints and move toward more digital and omnichannel customer experiences,” said Berliner.
With discretionary spending down overall, research firm eMarketer projects a 10.5% decline in total U.S. retail sales this year with the losses partially offset by an 18% increase in e-commerce sales.
Looking toward the future, the BDO report said retailers need to be prepared for a prolonged period of limited discretionary spending since many Americans are furloughed, unemployed or worried about future unemployment or continued pay cuts.
The analysts at BDO suggest that properly predicting and understanding the rapidly changing consumer preferences will be a necessity. This includes making sure that all e-commerce operations are prepared for record levels of traffic during the upcoming holiday season, including the availability of stock and dependable last-mile delivery, especially when it comes to home furnishings.
Even after a COVID-19 vaccine is accessible, BDO analysts said retailers should expect consumers to be concerned about the safety of in-store shopping. The research suggests that retailers who are nimble and who rely on data to better understand their customers will be more successful moving into 2021.