Dive Brief:

• Many retailers have been shuttering stores, but much of that is a correction from over-development of malls since the 1970s and, more recently, cheap interest rates that led many specialty retailers to open too many stores, according to new research from global research and advisory firm IHL.

• The report notes that this year retailers — a broad category in IHL's counting that includes food service outlets and convenience stores — are on track to open 4,080 more stores in 2017 than they are closing. However, when excluding fast food, convenience stores, and bars and restaurants, that number is negative, with 374 net closures. 

• The shrinking middle class is more and more a problem for retailers, as the growing expenses of childcare, health care and education are stifling consumer spending power, according to the report. More than half of U.S. households are worse off economically than they were two decades ago. According to IHL’s research, 40% of the population is unable to make enough money to keep up with inflation and another 20% is barely topping the 55% average inflation rate at the median income level.

Dive Insight:

IHL analysts attribute the traction of the "retail apocalypse" notion as a tendency for the media to cover bad news over good, an early Fung Global Retail & Technology report this year that noted more store closings than openings in the department store and apparel sector, and overblown ideas about Amazon as a retail "villain." Still, many challenges are real, like the pressures on the middle class and lower-income consumers as well as sector-specific disruption like fast-fashion, IHL said.

"Without question, retail is undergoing some fundamental changes. The days of ‘build it and they will come’ are over," Greg Buzek, IHL Group president said, in a statement. "However, retailers that are focusing on the customer experience, investing in better training of associates and integrating IT systems across channels will continue to succeed."

Buzek took particular exception to the term "retail apocalypse," noting that through the first seven months of the year retail sales are up $121.6 billion, an amount roughly equivalent to the total annual retail sales of the Netherlands. "The negative narrative that has been out there about the death of retail is patently false," he said. "The so-called ‘retail apocalypse’ makes for a great headline, but it’s simply not true."

Certainly, though, there have been sectors in retail suffering this year. The report notes 400 net department store closures and more than 3,100 net closures of specialty softgoods stores. At the same time, there have been booming sectors. The three fastest growing retail segments are mass merchandisers including off-price retailers and dollar stores (1,905 store openings), convenience stores (1,700 store openings) and grocery stores (674 store openings).

Overall, 42% of retailers have seen a net increase in stores, only 15% have a net decrease and 43% report no change, IHL said. Across all sectors (including food service and convenience stores), retailers plan to open another more than 5,500 in 2018, according to the report.

IHL’s research is making the rounds at about the same time as the release of a Moody’s Investors Service note challenging widely circulating guesses about the size of Amazon’s Prime membership base and notions about the e-commerce giant's all-consuming retail prowess. Analysts with the bond rating agency noted that, though Amazon dominates online sales, those sales account for just 10% of the industry as a whole.

As for its recent acquisition of Whole Foods, the analysts wrote, "We believe it’s a big stretch to say — as many in the market have been doing — that Amazon will dominate food retail, and some have said this will happen within two years." They pointed out that Amazon, even now with Whole Foods in the fold, controls only a $20 billion piece of an $800 billion market for food sales in the U.S. 

Still, total commerce growth in 2017 is 28% of retail growth and Amazon is about 50% of that, according to IHL. "Every apocalypse needs a villain, and Amazon has become the proxy villain in retail," IHL said in its report. "Online is certainly a growing part of the changes happening, and Amazon is the largest player, but their retail revenue growth, particularly in fashion and department stores, represents less than 5% of the impact on stores. ... Certainly Amazon is a threat, but they are not of the cause of what we are seeing in these segments that are struggling."