The COVID-19 pandemic has caused unprecedented disruption of commerce. The US retail sector is now bearing the brunt of the coronavirus-driven crisis. According to Walter Loeb, an analyst at Forbes, US retail trade is experiencing a real apocalypse as the oldest retail chains and a number of companies in the service sector are on the verge of bankruptcy.
A surge in the new coronavirus cases has significantly reduced the number of customers in stores. In addition, many shops did not open even after the easing of quarantine measures. The growing popularity of online shopping is also weighing on the retail trade. Notably, the number of traditional retailers have been shirking for the past 10 years.
Before the pandemic, retail stores were operating normally, although online shopping was stepping on its toes. Nowadays many consumers prefer making purchases online rather than going to traditional stores. As a result, US online retailers managed to gain a staggering profit. The most evident example of a successful online retailer is Amazon whose profit grew by a third, as did the fortune of its founder, Jeff Bezos. Nowadays he is considered the richest man in the world. According to the calculations of the research company Comparisun, if the Internet retail giant continues to expand at the same pace, then by 2026, Bezos’s net income will balloon to $1 trillion from $143 billion.
Walter Loeb argues that more than 9,500 stores will be closed in the United States this year. By the end of 2020, this number may increase if the government does not support small and medium-sized businesses. During the pandemic, 9,413 stores closed across the country. In 2019, 9,302 stores seized to exist while in 2018, US retailers announced 5,700 stores closing.
Japan's Ryohin Keikaku, which produces home and travel goods under the Muji brand, closed most of its stores. Currently, only 60% of the company's stores are open. Victoria's Secret, one of the leading manufacturers of women's underwear, also filed for bankruptcy. Gold's Gym International, the international chain of fitness centers, J. Crew clothing shops, as well as J. C. Penney, the oldest American chain of department stores established 118 years ago, also closed their stores due to the coronavirus.
Such legendary retail chains as Neiman Marcus luxury stores opened 112 years ago, men's clothing company Brooks Brothers founded 202 years ago, and car rental company Hertz, and others also were unable to withstand the coronavirus punch.
Experts point out that the US retail trade is now one of the weakest sectors of the economy. Its recovery may take many years. Claudio Del Vecchio, an Italian billionaire and owner of Brooks Brothers, is also seeking bankruptcy relief. The company will halt the production of clothing at its domestic factories in the US soon. "Retailing has been changing a lot in the last four to five years, and we were in the process of adapting to that new environment. When coronavirus came, there was really no way to sustain things,” Claudio said.
Rachel L. Smiley, a lawyer at Ross & Smith PC, thinks that the bankruptcy situation in the US may get worse due to the suspension of stimulus packages for small and medium-sized businesses. Many companies are unable to pay off their debts because of low profit. So, they have no other way out but to file for bankruptcy.
