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Will record-breaking holiday sales be enough to prevent retail closures?

Posted at 1:48 PM, Jan 02, 2019

The year 2018 was a tale of two stories: a year of record-breaking holiday sales and a year of retailers filing for bankruptcy.

According to the Mastercard Spending Pulse report, brick and mortar stores saw a 5 percent increase in sales compared to last year. There was a 19 percent increase for online sales. However, it was also year big retailers like Sears filed for bankruptcy, and Toys-R-Us closed its stores.

“Weak retailers are closing,” says marketing professor Darrin Duber-Smith. “It just takes them forever to close.”

What does this mean for retailers as we head into 2019?

“If the retailers that are in trouble--the ones that are kind of running out of cash, the ones that really look like they're going out of business--if they don't have a good holiday season, they're pretty much dead in the water in the first couple of quarters,” Duber-Smith explains.

Despite an increase in holiday sales overall, department stores struggled. Sales were reportedly down 1.3 percent this holiday season.

J.C. Penny’s stock fell below $1 a share for the first time last week. Lord & Taylor and Saks Fifth Avenue have been shutting down some of their flagship stores, and Nieman Marcus has big debt coming due in 2020 and 2021. Duber-Smith says debt is a make or break.

“These brands that are saddled with so much debt aren't able to invest in their companies,” he explains. “They're not able to invest in marketing. They're not able to invest in e-commerce.”

E-commerce is key. Online sales growth for department stores grew 10.2 percent, but Amazon is still king when it comes to online retailers. That's why some stores have decided to work with the retail giant.

“Best Buy was left for dead,” Duber-Smith explains. “Now, they have a partnership with Amazon where you can try the products in-store and buy it on Amazon. But now, Best Buy get a piece of that action.”

Survival for some retailers means finding creative ways to thrive in an ever-changing retail landscape.