NEW YORK (CBS NEWS) – U.S. retailers have a problem they can’t easily resolve: They have too many stores. And even though they’ve already announced slews of store closings, it’s increasingly likely they’ll have to shutter even more over the next few years. That’s especially the case as consumers keep shifting their spending online, which has left the U.S. awash in unwanted retail space, or “overstored.”
According to real estate information firm CoStar, nearly 1 billion square foot of retail space will be “rationalized” in the coming years through store closures and conversions to other uses. Many retailers also are seeking rent reductions as their productivity has slumped from an industry average of $330 in sales per square foot from $350 per square foot a decade ago.
The level of “overstoring” may only get worse. Retail analyst Jan Rogers Kniffen expects about half of all retail sales to be online by 2030, a huge increase from current figure of about 10 percent.
“A lot of these retailers are still in denial,” said Brian Yarbrough, a retail analyst at Edward Jones. “I think the Kohl’s, the J.C. Penneys of the world, they’re in denial. At some point, there’s probably not a need for 2,400 Kohl’s and J.C. Penney’s across the United States. There’s probably not a need for 5,800 Walmart Supercenters.”
Here’s a closer look at how the chains are dealing with store closings.
J.C. Penney — CEO Marvin Ellison made headlines in March that when he told Fortune he wouldn’t undertake “any wholesale closings of stores in its 1,020-location fleet,” though it did shutter seven locations. The Plano-based retailer operates almost as many stores as it did in 2006, but its annual sales were roughly $7 billion higher back then than they were last year. Ellison told the magazine that Penney’s future lies in e-commerce and physical stores working together.
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