Discounters Big Retail Winners In 2018, Department Stores Still Beleaguered
More than a dozen major U.S. retailers filed for bankruptcy in 2018, including the now-gone Toys R Us, along with Sears Holdings Corp., which teetered on the edge of liquidation as the new year started.
But last year also saw its share of retail winners, including behemoths such as Walmart and Target, as well as smaller, nimble players such as T.J. Maxx, Ross Stores and Burlington Stores. Discounters did particularly well.
The continuing bifurcation of the retail market into winners and losers was in large part because winners have adapted to changes in consumer habits. The 2018 winners beat their rivals by providing faster delivery, better options for online and mobile shopping, and the products that consumers wanted, CNBC reports.
Discounters proved to be big winners in 2018, offering what most consumers want, even when the economy is relatively strong: inexpensive goods.
The consumer loves a value, Marie Driscoll, managing director of luxury and fashion for Coresight Research, told CNBC. She also said millennials are seeking out off-price channels more than ever before.
As a class of discounters, dollar stores are also doing well. In the case of Dollar General, the chain is not only growing in number — it plans to open just under 1,000 new locations this year — but also in the quality of its offerings, such as more fresh food.
Part of the company's expansion strategy is to offer more food and expand into areas, especially rural areas, that lack grocery options.
By contrast, department stores have been on the skids for years, and 2018 wasn't any different. The old-school format department store goes against the taste of the modern shopper, and many department stores haven't been able to adapt to the new reality.
“People prefer small connections with boutique interactions,” JLL Director of Retail Research James Cook told Bisnow.
Sears, however, might survive in 2019 in some form, possibly as a privately owned chain with a much smaller footprint. As 2018 ended, Sears Chairman Eddie Lampert, via his hedge fund ESL Investments, offered a $4.4B plan that would include taking over 425 stores and a $1.3B loan to help turn around the business.
It is now up to Sears' creditors to accept or reject Lampert's bid. A rejection would mean liquidation for the storied Hoffman Estates, Illinois-based retailer whose origin goes back to the late 19th century.
Department stores weren't the only retailers suffering in 2018 as consumer tastes change. Bon-Ton, Mattress Firm and David's Bridal all filed for bankruptcy last year, and Toys R Us closed all of its locations in mid-2018 after a 2017 Chapter 11 (protection) filing that it later changed to Chapter 7 (liquidation).