Retail Apocalypse

Retail Apocalypse is a term that refers to a revolution sweeping through the American retail ecosystem resulting in bankruptcies or serious problems for many retail chains. Such companies as Sears, Nine West, Toys ‘R’ Us and Diesel have recently filed for bankruptcy. A footwear retailer Payless has declared bankruptcy twice in the last two years (in 2017 and 2019) and is to close 2,500 of its stores (being the largest retail liquidation in history according to BusinessInsider.com).

Other chains are scaling back their operations: in 2017 retailers closed a record-breaking 102 mln square feet [9.47 mln sqm] of store space, but in the following year that record was broken by 50 pct (155 million square feet). 2019 will bring more closings: Gymboree - 805 stores, Shopko - 371, Gap - 230, Sears - 70, Victoria's Secret - 53, Abercrombie & Fitch - 40. More than 6,000 stores are to be closed in 2019, and according to Forbes – 75,000 will disappear by 2026, including 25 pct of clothing stores, 25 pct of consumer electronics stores and 32 pct of home furnishing stores.

The reason for this tornado has been placed on the growth of online retail. Which is probably true although other factors are adding fuel to the fire including a shrinking middle class, growing retail chain debts and the wrong decisions some of them have taken. Some are of the view that the term "apocalypse" is an exaggeration, since – apart from the above mentioned closings - also quite a number of new stores are opening up. This opinion is not really convincing as the trend of bankruptcies, closures and other problems is in excess of the usual conditions of an evolving market or of the more efficient players pushing out weaker competitors.

Is this just interesting information from across the ocean or could it also apply to retail in Poland? I am of the second opinion. In Poland the development of e-commerce is also very fact (Amazon does not operate in Poland yet but it is starting to open up its logistic centres and the German version of their store has had a Polish site for quite a while now). Also in Poland we hear information about the problems of retail chains (Alma, Matras, Piotr i Paweł, and Simple are just a few). Last but not least, in Poland we can also expect to see the moment when the results of the universal laws of economic cycles become apparent and we will have to face a slump and decreasing demand.

That is why it is worth sparing some thought to the question of whether Polish retail chains are prepared for these problems, and whether the owners of Polish shopping centres are prepared for the problems of their tenants. I think that the answer to the second question is no - each tenant bankruptcy we have been involved in has resulted in a bit of a crisis for the owners and a necessity to analyze how to recover the rents due (or even a part of them), how to get the premises back to lease it out again, how to handle a bankruptcy officer on the premises. The scale of the difficulties will rise if instead of one problematic tenant, there will be five at the same time. Now is the time to prepare for such a situation.