The Spirit Beast

By the numbers, everything is looking up, but can retailers wait until the day the pause button is released by the epidemic?

Author/Ten Mile ID/lingshouke

Under the epidemic, there is no egg.

Recently, the Japanese company Ryojin plan announced that the new crown epidemic impact, performance deteriorated sharply, the U.S. subsidiary liabilities of 64 million U.S. dollars, has applied to the U.S. court for bankruptcy protection.

No coincidence.

Brooks, a well-known U.S. apparel retailer, also announced that it had filed for bankruptcy in a U.S. court.

This has more than 200 years of history of the United States of America's long-established apparel brand, on behalf of the weathervane, the end of Brooks completely retail winter to the climax of its bankruptcy for the United States is a huge loss, but also a "warning".

And before that, the U.S. retail industry has been "littered with corpses".

The number of bankruptcies in the U.S. retail industry has been increasing, especially after the second quarter.

A large number of retailers around the world are facing huge difficulties and are caught in the maelstrom, with tens of thousands of stores closing, bankruptcies, store closures, and layoffs, and more and more globally renowned retailers are falling in the "dawn".

1

The collapse of the global retail giant

The business has been affected by not only the U.S. subsidiary of MUJI, the first half of this year, MUJI's sales in Japan stores have fallen by nearly half, and in the Chinese market as well. "Low", China same-store sales have been declining since 2016, and have not yet stopped the decline.

The list of retailers going into liquidation is still intensifying under the impact of the epidemic.

On July 8, Ascena, a well-known U.S. apparel retailer, announced that it had filed for bankruptcy in a U.S. court, and Ascena, which owns a number of women's apparel brands such as Ann Taylor and LOFT, will close at least 1,200 stores. And before that, Vimy applied for bankruptcy reorganization in June due to a sharp drop in sales.

Outside of the apparel category, restaurants are also "behind bars".

On June 23, GNC, the largest health food chain in the United States, filed for bankruptcy, hoping to be able to continue normal operations while consolidating subsequent debt and completing a sale.

And Starbucks is also announcing the closure of 400 traditional stores over the next 18 months, along with the development and expansion of touchless services such as curbside pickup and drive-through ordering.

In fact, since the outbreak, more and more of the world's leading retailers have been hit hard, and have even dropped out of the history books.

According to the data, the number of commercial breakouts in the US this year has reached 3,604, up 26% year-on-year. Among them, the new increase in June this year was 609 cases, an increase of 43% year-on-year.

Relevant industry insiders analyzed that at the end of the third quarter, the retail industry will see a wave of bankruptcies, and if (the U.S.) still can not control the epidemic, September and October will be a real disaster.

It is in this environment that the rate of bankruptcies in the US is accelerating, and the number of bankruptcies is climbing and increasing.

Even Uniqlo, which has been at the altar for many years, has not been spared.

According to Uniqlo's parent company, Japan's rapid sales group recently released its financial results show that the impact of the epidemic, as of the end of May, the third fiscal quarter, the company's net loss of 9.82 billion yen, all the major overseas markets of the Uniqlo business revenues and earnings have fallen sharply.

And ZARA's parent company, Spanish apparel giant Inditex, said it will close 1,200 stores worldwide over the next two years.Inditex has nearly 7,500 retail stores in 96 countries/regions around the world, and the planned permanent closures account for roughly 16% of the total number of stores worldwide.

According to Inditex's Q1 2020 earnings release, 88% of its stores were forced to close during the epidemic, with global sales down 44% year-on-year and losses severe.

And from the recent release of Nike's Q4 FY2020 results (for the period March-May), it realized operating income of $37.403 billion, down 4% year-on-year.

As of the end of May 2020 fiscal fourth quarter, Nike operating income amounted to $ 6.313 billion, lower than the expected $ 7.38 billion, a decline of 38.14% year-on-year, quarterly net loss of $ 790 million (about 5.6 billion yuan), a year-on-year decline of 179.88%.

With a huge loss of $5.6 billion, Nike's market capitalization shrunk by 3 Mission Hills homes, and the head claimed to employees that layoffs were coming.

Some industry bodies expect that throughout this year, the total number of stores announced to close in the United States could reach a record high of 20,000-25,000, of which about 55%-60% are located in U.S. shopping malls, so that the department store industry will be affected.

Outside the US, in the UK, in addition to Secret, veteran department store retailer Debenhams, leading British brand Kath Kidston and online menswear retailer TM Lewin have all announced closures in recent months.

The "black swan" has gripped the retail industry, with thousands of businesses going into liquidation since the epidemic spread, and the upcoming September is the peak selling season in the US, the perfect time for many retailers to push their results and run promotions.

Many industry insiders predict that if the epidemic in the United States in September has not been effectively controlled, many companies will lose an important "turnaround opportunity", when the bankruptcy, the list of closed stores will appear more retailers.

2

Operational problems emerged early

Indy's exit from the U.S. market is also "expected".

The data show that Muji officially entered the U.S. market in 2006, and currently has 18 stores in the U.S., with annual sales of about 102 million U.S. dollars, accounting for 2.5% of the revenue of the good plan, but in the past three fiscal years, the U.S. market has been in a state of loss.

And since the outbreak, all 18 Muji stores in the US have been shut down, with huge rental costs exacerbating the pressure on the US company's revenue.

According to the announcement, Muji's U.S. subsidiary has taken a variety of ways to improve its business during the outbreak, such as expanding its customer base and negotiating rents, but sales revenues have dropped significantly due to the expanding outbreak and store closures.

But on the flip side, MUJI's trend in the Chinese market remains decadent.

Perhaps it is the difference in brand concepts, over the years, no matter from the goods to the price of MUJI has never put down the "bone" in the pride, while the Chinese market in the standard brand but in the price gimmick "blood fight", Netease Yanxuan, millet, Mecca, Yupin, and other brands. There are products, millet, famous brand, NOME and other retailers are rapidly rising, "high on the" of the impact of the non-Indian good quality.

The industry analyzes this, do not pay attention to localization is the main reason for the Indo-Germanic in foreign markets "not adaptable".

For different markets at home and abroad, the products sold by MUJI did not carry out specific adjustments, minimalist, simple product design is also easy to be imitated, in the tax and tariffs under the influence of the foreign price of MUJI will be much more expensive, high-price and high-quality is not completely corresponding.

But this year, MUJI put down the "frame" and entered the convenience store market in Beijing and Shanghai. Officially, MUJI convenience stores are aimed at community business, providing localized services to the local community by penetrating into various communities in the city.

According to the report, MUJI's convenience stores are a combination of quality convenience stores, coffee and food, and office and leisure venues that provide convenience and support for people's workplace life.

MUJI has just made a change, but I don't know if the market continues to give the opportunity.

In fact, in order to solve the brand's dilemma, MUJI has long been in China to carry out a number of "cross-border" attempts, has launched MUJI restaurants, MUJI hotels and other sub-brands, and this time also aimed at the community business market. Just whether these derivative sub-brands can help Indy get out of trouble is not yet known.

Muji's US subsidiary is one of more than a thousand companies that have filed for bankruptcy as a result of the epidemic, which has swept retailers across the globe, and the bankruptcy filing is a way for companies to try to cope.

And Brooks, the giant US retailer, has now gone to the next step of the bankruptcy process after laying off nearly 700 employees and closing 20% of its stores within the US since June of this year.

Analysts pointed out that the United States restarted the economy has been more than a month, but the economic situation and epidemic prevention and control have not seen a significant improvement.

Many bankrupt companies in the epidemic before the occurrence of mismanagement has been faced with a tight capital chain, sales plummeted, the epidemic just accelerated the process of its bankruptcy.

3

Crisis? Turnaround?

While thousands of businesses have filed for bankruptcy, that doesn't necessarily mean the company is failing.

Many companies use the bankruptcy process to get out of debt and close unprofitable businesses so they can focus more on profitable strategies.

At the same time, and domestic retailers "self-help" approach, in order to get through the epidemic crisis as soon as possible, many retailers such as Topshop, H& M, etc. have taken the same way as Starbucks, Zara, etc., that is, one after another to close a number of stores around the world, at the same time, began to make efforts to online sales,

This is the first time that we've seen the impact of the epidemic on our customers.

In order to cope with the crisis, they hope to withstand the industry's cold winter.

According to the information, ZARA's parent company announced the store closure plan at the same time, said it would invest about $ 3 billion to promote the online operation of its chain of brands, hoping to increase the proportion of online sales in 2022 from 14% in 2019 to 25%.

Compared to the woes of brick-and-mortar retail, the e-commerce business did make up for some sales. For its part, sales on U.S. e-commerce platforms reached the level of last year's year-end shopping season, according to the data.

Another set of online retail sales surge, the U.S. Department of Commerce recently released data showing that seasonally adjusted U.S. e-commerce retail sales in the first quarter of 2020 amounted to 160.3 billion U.S. dollars, an increase of 2.4% YoY and 14.8% YoY, respectively.

And total U.S. retail sales in the first quarter were $1.3635 trillion, down 1.3% sequentially and up 2.1% year-over-year. E-commerce retail sales as a percentage of total retail sales in the first quarter were 11.8%.

So it seems that online is also a "life-saving straw" for brick-and-mortar retail, but the drawbacks and dilemmas exist at the same time.

First of all, the proportion of online sales is not large enough to fully support and make up for the losses of the past epidemic will take time and cost. In addition, delivery costs increased dramatically during the epidemic, while the return rate for many retailers even exceeded 50%, which, combined with increased competition, pushed up overall costs.

Finally, whether or not there is demand outside of the channels for brick-and-mortar retailers to switch to online is also something to consider, and it's hard to fully restore normality to the retail industry by relying on online alone.

The U.S. Department of Commerce released data on Thursday showed that the U.S. retail sales in June, the monthly rate of the announcement, recorded 7.5%, better than the market is expected to 5%, the previous value from 17.70% revised up to 18.2%. The retail sales data exceeded expectations for the second consecutive month as more businesses reopened.