SANTA CLARA, Calif. - As retail evolves, one major pharmacy chain is closing one in 10 of its stores to make major changes. Other chains are wrestling with their own problems in how to adapt to a changing retail landscape.
CVS says, 900 of its stores will be gone over the next three years. They say in closing some 10% of its stores, it's shifting to a more online digital strategy and evolving from just supplying prescriptions and sundries, to having more direct health care personnel for patients in their stores.
"Many of the current locations may not be particularly helpful or be the right kind of locations for that new kind of service," said Professor Kirthi Kalyanam, director of Santa Clara University's Retail Management Institute. He also says some retailers risk becoming irrelevant.
"Many of these retailers have been a little too slow to close stores and refurbish the stores. They've been dragging their feet on it," said Kalyanam.
For example, California's very last Kmart, in Grass Valley, closes December 19, with only 21 stores left nationwide. On November 9, DSW announced the closure of its four-story location in Union Square and 64 more of its stores.
However, Macy’s announced that it plans to close 10 stores in January, but delayed 60 planned closures, because it found that online sales are stronger in the markets where it has stores.
"Often for these retailers, e-commerce is a less profitable business than the store business," said Kalyanam. And, closing doors takes away a store's enormous effect of being a free living billboard. "Your advertising expenses can double if you shut down your physical store because that billboard effect is so strong," said the professor.
Because U.S. brick and mortar malls, strip malls and outlet malls grew from 90,000 in 2000 to 115,000 in 2020, we probably had way too many places to shop. That's why financial giant UBS projects that if online shopping grows from 18% of retail sales today to 27% in five years, it projects that some 80,000 retail stores will close but others may arise. "Consumer behavior is moving faster than retailers' ability to respond to that consumer behavior," said Professor Kalyanam.
Even mighty Amazon set up stores for that billboard effect.