The wide world of retail finds itself today at a crucial crossroads. Lesser affected have been the elite, high-end shopping centers and, conversely, the lower-end centers, each of which cater to a defined subset of shoppers. However, the majority of retail centers nationwide fall into the mid-range category. Many of these mid-tier retail centers, as well as the retailers themselves, are struggling — mimicking in many ways the plight of the country’s shrinking middle-class.

Consumer tastes, preferences and budgets continue to evolve, leaving many formerly strong retail brands dying in the wake. An obvious example of this new retail reality can be found in the teen apparel sector. A closer look at who, what, when and where helps shine a light on the why behind this disruption – and how the industry can recover.

First, let's look at some illuminating numbers. Since the beginning of the year, there have been more than 300 retail bankruptcies. And while many of these bankruptcies are of the “mom and pop” variety of stores, mostly consisting of names that are largely unknown, the number of retail bankruptcies still represents a 31% increase over the same 6-month period in 2016. In fact, year-to-date, we have already witnessed more comparable bankruptcies than all of the previous year. That's an alarming trend, indeed.

What a Girl Wants

A look at teen apparel-focused retailers who are struggling or have filed for bankruptcy within the past 12-18 months reads like a veritable ‘Who’s Who’ of once proud, once strong name brands, including:

• Aeropostale
• American Eagle 
• Bebe
• J. Crew
• Quicksilver 
• Rue21 (closing 400 of its 1,200 stores)
• Wet Seal

Additionally, Gymboree, along with its associated Crazy 8 and Janie and Jack nameplates, is closing 400 of its 1,300 stores while Children’s Place (closing 300 stores by 2020) and Claire’s (53 store closings in 2016) could be close to filing bankruptcy and/or shedding additional stores in an effort to stay afloat. While some retailers will no doubt emerge from bankruptcy leaner in the short term, many will inevitably find themselves right back where they started within a few yearr. They may follow in the footsteps of Radio Shack, Wet Seal, and American Apparel, and once again file for bankruptcy — a term derisively referred to as a Chapter 22. The long-term future looks bleak for many of these retailers; some will not survive.

Today’s teenagers simply do not feel obligated to spend a lot of money on clothing like their predecessors. As such, teens are now shopping at hot retailers such as H&M and Forever 21, which offer trendy clothing at affordable prices. There are a lot of cheap, fashionable options in the marketplace. Teens are no longer choosing to spend $75 on an Aeropostale or Abercrombie & Fitch t-shirt when they can buy one at Forever 21 for $14.99. Money earmarked for significant purchases instead goes toward technology purchases such as iPhones and iPads.

Other interesting dynamics at play are taste and preference. Today’s teens appear unwilling to pay a premium for retailer logos affixed on the apparel. American Eagle, Aeropostale, and Abercrombie & Fitch each used to be sought out for their emblazoned marks — a sign of peer prestige. At the root of this preferential choice, beyond style, is, again, price. After all, why pay $80 for an A&F logo’d sweatshirt when you can find it cheaper elsewhere for $10-$20. Lululemon is perhaps the one exception where “marks” are concerned. Here, subtlety in application is the key. Otherwise, high-profile brands are simply not viewed as cool. It’s just the way it is today.

One can also not overestimate the impact on millennials of the economic crash of a few years go, whose effect is still felt today. Parents who previously would have underwritten a pricey brand name purchase can simply no longer do so. Instead, these kids had to save their pennies and, as a result, have gained an acute awareness of the sometimes-fleeting value of the almighty buck. As this generation gets older, they are much less likely to invest in the stock market. They aren’t buying cars at the same rate and they are not as interested in home ownership. More important is social activism, experiences and (we’re going to use the keyword again here) value.

American Woman

In many ways the millennial retail revolution is three years behind similar attrition within the women’s apparel industry. There, a pre-2008 economic boom and still-strong  traditional mall shopping audience would lead to what would eventually become an over-build of new stores. Retailers such as Coldwater Creek, Chico’s, J.Jill and others all embarked on new store tears in the late 1990s — coinciding with a housing boom, where consumers had more disposable income than perhaps every before.

That overextension would soon come back to haunt these retailers in a realm where supply suddenly was not in synch with demand. Between 2014 and 2015, Coldwater Creek filed for bankruptcy along with Ashley Stewart and Loehmann’s. Chico’s did not file for bankruptcy yet closed 120 stores. J. Crew and Gap continued their struggles as well.

Further complicating matters for those retailers was that, despite becoming leaner through the closing of select stores, they were still on the hook for lease obligations. To make matters worse, in certain cases stores were unable to be closed, even when unprofitable, due to "continuous operations" clauses designed to protect savvy mall owner/operators.

Call it a case of oversaturation of stores and retailers not serving a large enough, sustainable market niche. Add in new women’s retail options at lower price points and with greater value, and a perfect storm scenario was thus realized.

The Amazon Factor

And then there is Amazon — the arch nemesis of the traditional bricks-and-mortar retailer. Let’s look again at a few numbers. First, market value in 2016 for top traditional retailers:

• Sears: $1.1 billion
• Nordstrom: $8.3 billion
• Target: $40.6 billion

By stark contrast, Amazon’s market value in 2016 was an astronomical $355 billion.

When examining apparel sales, consider that in 2012 sales at Macy’s were five-times greater than those of Amazon. In 2016, apparel sales at Macy’s were $22 billion, while Amazon is expected to sell $30 billion in apparel only in 2017.

Adding further insult to injury is the convenience offered by Amazon (or any online retailer). Amazon, for its part, is in beta for Prime Wardrobe, which allows Prime members to ship clothing and accessories to their home to try on for free. Members must choose at least three items to ship and they have seven days to choose the products they would like to keep. The consumer receives a 10% discount if he or she chooses to keep three or four items from the order and 20% for keeping five or more. Basically, keep what you want and send back what you don’t – all from the comfort of your home.

My, how times have changed — and not just for traditional brick-and-mortar retailers, but also for malls and landlords. Simon, General Growth, Taubman and other landlords who have malls throughout the country are feeling the pain. Malls are seeing their vacancy rates increasing as their tenants experience declining sales. One-time stalwart anchors such as Sears, Macy's, and J.C. Penney are closing locations across the country, causing the retailers left in the wake of the store closures to invoke co-tenancy clause violations, which result in yet even lower revenue for the mall. It is a vicious cycle of lower revenue, and future prospects appear dim.

The New Retail Reality: Don’t Think “Retail”

Top landlords know (or are fast realizing) that they can no longer operate as they have in the past. Philosophically, the thought of centers offering traditional retail fare needs to be replaced with the idea of offering consumer experiences. One area is in quasi-medical and office. Fairlane Mall in Dearborn, Michigan, has seen hundreds of Ford Motor Company professionals move in to repurposed retail space in recent months. Significant capital is needed, however, to accomplish such a feat. Several retail projects are considering razing a portion of a struggling center and developing multi-family housing in markets lacking an abundance of apartments. Still others have adapted space to into a wide range of medical facilities.

Along similar lines, trendy gyms are proving beneficial to landlords via newer concepts such as Orangetheory Fitness, the Barre Code and Daily Method. Swim Schools are also assisting by driving traffic and spurring contiguous sales to retailers and restaurants. And, in the educational area, TutorMe and the Kumon math and reading programs similarly attract kids and parents who often make other retail purchases before or after appointments.

For the traditional retail concepts, staying afloat remains realizing a value proposition – both for their customers and themselves. For landlords, it has never been more vital to really understand their tenants’ business and sales realities and to strike an appropriate balance between playing hardball and working toward long-term, equitable solutions.

Final Thoughts at Checkout

The retail market remains extremely fluid with new realities changing our perceptions every day. Some still cling to timeworn concepts but most know we have passed the point of no return. Today, it is about moving forward with savvy, vision, creativity and a resolve to give consumers what they want, albeit in a different, integrated way.

For retail, the phrase “Adapt or Die” has never, ever been more apropos.