U.S. Retail Industry Numbers: 361 Store Closings, 989 Store Openings, 9 Chapter 11 Updates, 417 Expansions in 2010, 1 Giant Slayer and Sales Success That Is Five Below

When looking at the numbers from the U.S. retail industry in the second half of October, it appears that retail expansion will be gaining twice as much momentum as retail recession in the last two months of 2009. Included in the store opening figures, however, are 757 stores which have quickly popped up in the plentiful inventory of dark retail spaces across America, but which will disappear just as quickly when shoppers stop their holiday spending sprees. Seeing those empty retail spaces filled will add some cheer to the holiday shopping experience, but considering the fair weather retailers as part of an authentic trend is not really helpful.

Minus the holiday popups, the U.S. retail numbers go the other way, with nearly twice as many store closings as openings, along with a significant new batch of retail chains hanging in the balance after recently filing for Chapter 11 protection. A glimpse of real recovery is found in the 2010 Store Openings list, which is growing significantly each week. But until plans become reality, these future store openings are little more than holiday season ho-ho-hope for recovery as well.

The biggest contributor to the 2009 Store Closings list in the second half of October was Movie Gallery, the owner of the Hollywood Video chain. The company has closed 250 stores since September 1, and may close another 200 before the end of 2009. Reportedly the company has even set up a special toll-free number for the commercial landlords who haven't gotten paid lately. Establishing a dedicated unpaid rent hotline says a lot about the well-being of a company, I think.

It's interesting that earlier this month Movie Gallery staged a promotion which resulted in the donation of 20,000 DVDs to military families. For every two DVDs that customers purchased, Movie Gallery donated 3 DVDs to Operation Homefront.

Considering the company's recent downsizing activities, this DVD donation promotion could have been mostly an inventory reduction strategy. If so, clever points go to Movie Gallery. And no matter what the motivation, it was $300,000 worth of inventory well placed. It was also a great way for Movie Gallery to boost its brand higher than its main competitor, which is also busy closing 960 Blockbuster stores.

Meanwhile, last week we learned that the biggest nemesis of the two biggest movie rental chains has been busy creating more ways to make the brick-and-mortar DVD distribution system even more obsolete and irrelevant. Sony announced last week that Netflix is the partner of choice for delivering movie and television content via its PS3 systems. And strong rumors, still without credible confirmation, were also swirling around a similar partnership between Nintendo and Netflix last week. Can Wii movies be far behind?

It's been inspiring to watch little old Netflix take down two giant retailers with one strategic slingshot. For small companies with big ideas, this is a case study in the power of innovation and customer satisfaction. For large retail chains that are busy watching stock prices and each other, this is a case study in misdirected focus and short-sighted vision.

For home movie watching customers this is a case study in free enterprise at its finest. If there is a better, cheaper, faster way to deliver products, some enterprising retailer will likely find it, to the benefit of the average consumer. Right now Netflix is the American way.

Five Below is another diminutive chain that is hoping to borrow the Netflix slingshot and see what kind of damage it can do to the competition. This small regional chain, however, is not taking aim at just one or two competitors, though. Five Below is targeting an entire market segment that it wants to steal from a whole lot of different retail giants.

This new ultra discount specialty retail chain wants to steal the tween and teen customers from Best Buy with its electronic accessories, from Michael's with its art supplies, from Party City with its holiday stuff, from Bed, Bath and Beyond with its bedroom decor, and from Hot Topic with its vampire t-shirts. Five Below is also happy to lure young customers away from Wal-Mart, Dollar General, Target, Old Navy, and every other chain that carries all the cheap and unnecessary stuff that underage discretionary income can buy.

Apparently Five Below is successfully gaining "it" status with trendy cost-conscious teens already. The six new locations that it is contributing to the 2009 Store Openings list on November 6th, and the 98 stores it added to the 2010 store openings tally is proof of that.

The chain's popularity could have something to do with the fact that everything in its stores is priced below $5. But it probably also has something to do with its mission to sell "the trendiest, coolest, highest quality stuff that you just gotta have!" For now, at least, TISC! (If you don't know what that textonym means, you definitely aren't in Five Below's target market. So, if your kids drag you there, just head to the candy aisle.)

One company that wishes it still had its "it" status is Crabtree & Evelyn, which recently shuttered 25% of its chain and joined the Retail Chapter 11 list last week. It seems that the demand for pricey lotions and potions has decreased, causing Crabtree and Evelyn to downsize accordingly.

It also seems that using the Chapter 11 process as leverage to renegotiate rents and leases has become a U.S. retail standard practice this year. Chapter 11 as rent control is a strategy that won't be relevant or workable forever, so there's no time like the present for Crabtree & Evelyn to employ it.

It would have been easier if everyone in the U.S. would have made a blanket agreement at the beginning of 2009 to rollback everything - prices, salaries, net worth, etc. - by 25% across the board. That's where we're all going to land eventually anyway. Instead, the recessionary rollback has been happening in the slowest and most painful way possible because we've all been trying to hang on to an economic reality that was never all that real.

For the rest of 2009, retail momentum will probably still be rolling back overall. I think it will be key for retailers to not get panicked by the continuing decline, and not get too exhausted trying to create better results than the economy can support.

I recently watched a video about how to survive if you ever step into quicksand. (Other than Gilligan, I've never known anyone that got stuck in quicksand, but more is better when it comes to life survival strategies I think.) While I was watching this quicksand survival video, I was thinking that it was a perfect metaphor for U.S. retail industry recovery:

1) Stay calm.
2) Don't let the struggle suck you down.
3) Change your angle.
4) Wiggle free.
5) Crawl to solid ground.

If the strategy works for escaping one type of unstable soupy muck, it should work for any type of unstable external conditions that threaten to suck you down and make forward motion impossible.

The numbers in the second half of October indicate that U.S. retailers are still likely to find themselves in the middle of some more recessionary muck in the short-term. The key for retailers will be to not let it drag them down too far, find a different angle, and leave themselves some wiggle room.

Most important, retailers will have to abandon their pride if a slow and clunky crawl through the next few quarters is necessary before we all find ourselves on stable ground once again. No matter what the stock analysts think, it doesn't matter how pretty you look during the recovery process. What matters is that you manage to survive.