Talk Of Recession Looms? Things Could Get Even Worse For Independent Retailers

Things Independent Retailers should be aware of
Image of Store Liquidation

Amid fears of the US heading into a recession, experts can’t help but talk about the latest High-profile bankruptcies and store closures.

Their biggest burning question is this:

If big companies like Payless ShoeSource, Gymboree and Things Remembered can’t make it in this climate, how can the Independent stores survive – especially if the forecasted recession hits?

We have all witnessed over the last few years the literal gutting of some of the largest and longest established retailers in the country, more importantly, this has been happening during booming economic times.

It seems unimaginable what the fate of the Independent store owner could be faced with a slowed economy.

With a volatile stock market, new tariffs and declining global economy, the American consumer will be holding back on spending and carefully assessing where to put their hard earned dollars.

Mark Cohen, director of retail studies at Columbia Business School and the former chief executive of Sears Canada says it bluntly, “If there’s another recession — and I think there will be soon — everyone gets knocked down.”

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  • The numbers certainly reflect his sentiment as so far this year according to data from Coresight Research more than 7,500 retailers have announced closures.
  • In all of 2018, only 5,500 stores closed their doors for good.

There seems to be another prominent trend in the retail space that is taking shape with the newest earning season coming to a close.

Analysts say that there is little “middle ground” left within the retail industry and either businesses are showing good profits or they are struggling to hang on – that will most certainly become even more pronounced if a recession hits.

Image of Retail Liquidation in process

The gulf between the businesses showing a profit and those losing money daily is expected to widen dramatically in the coming months.

Companies like Target, Walmart, Lowes and Dollar General that most times are in direct competition with Independent stores have been posting great profits and will be even more of a drain on Independents sales moving forward.

This is evidenced by Target’s chief executive, Brian Cornell stating that his company is benefiting from the demise of its competitors in the current “volatile environment” and they are using this momentum to dominate an area.

With the added customer benefits of in-store pick up, delivery services and adding many new private label brands they expect to see sales continue to increase as they tick up efforts to stay in step with Amazon.

Another obstacle for struggling Independent store owners in this economic climate are the administration’s new tariffs on China for the import of clothing, toys and many other items.

This 300 billion dollar bill is set to go into effect as soon as the next few weeks.

Costs for merchandise will most certainly skyrocket and put a major strain on receiving of merchandise.

The last thing that Independent store owners need in the midst of one of the toughest retail shifts many have ever seen, is a recession.

Many major retailers, with deep pockets and multiple resources filing for bankruptcy everyday.

The Independent store owner needs to seriously consider whether it may be time to close down their business before it gets even tougher to see a profit in the coming months.

The coming months will be crucial for retailers as they brace for the Trump administration’s new tariffs on $300 billion worth of Chinese imports — including toys, televisions and clothing — that will go into effect in mid-September.

The constant uncertainty is already changing how they prepare for the busy holiday period.

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