Expect more store closings despite big holiday sales

In a sign of how dramatically the landscape is changing when it comes to shopping, experts say don't expect any let up in store closings in 2017 just because retailers just had biggest growth in holiday sales in five years.

Consumers finally opened their wallets, making purchases on everything from toys to apparel. But a record amount of the spending for the season went to online sellers. And when the droves eventually showed up in stores, much of the foot traffic was driven by discounting.

Promotions are great for shoppers, but not terribly profitable business for those who own traditional stores.

"This was a fantastic shopping season, but for many department store and apparel retailers, this was a very challenging holiday," says Steven Barr, retail consumer leader for consultants PwC. "I anticipate we will see significant numbers of store closures."

Macy's, for instance, has already announced it will close about 100 stores in 2017 -- and is yet to specify the locations. The closings will amount to about 15% of Macy's 675 full-line locations. Other department store chains may follow suit.

Top retailers that are closing stores in 2016

Yet the switch comes at a time when retailing, as a whole, is shining.

Americans are just in a mood to spend again. The shopping binge came as the Consumer Confidence Index hit a 13-year high in a surge of optimism about the economy, jobs and income, The Conference Board, a non-profit research organization, reported Tuesday.

Overall, consumers spent $196.1 billion on holiday purchases, up 3.8%, the biggest increase since 2011, says research firm Conlumino in a report Friday. Mastercard's SpendingPulse put the increase at 4% and said the day before Christmas was the top shopping day of the season.

While stores saw a 2.6% increase, the big winner was online sellers, which saw their sales soar 17.1%, Conlumino said. It was the biggest online gain for online in at least a decade.

Amazon and other online-only sellers scored big. Among traditional retailers, the big gains went to discounters -- but not to mass merchandisers and department stores.

For stores, the season could have gone worse. After a post-Thanksgiving shopping surge, consumers quieted down in early December. Warmer temperatures kept some shoppers out of the malls. But then along came colder weather in much of the country and blizzards that drove some into the comfort of warm malls. Plus, there was the calendar -- bringing out shopping procrastinators.

An even bigger factor? Sales and discounting. "The sales that happened at the end of the month" certainly helped, says Ray Hartjen, spokesman for sales tracker RetailNext. "Price erosion" played a role leading up to the holidays.

As a result, sales at traditional stores were up 6.5% in the final week before Christmas and the start of Hannukah, compared to the same week last year, says trackers RetailNext. While overall foot traffic was down 3.9% compared to a year ago, shoppers were in more of a mood to spend -- with a 9.9% increase in the average sales transaction.

Now, as retailers look to the new year, the challenge for store chains will be to better define their place in the market and create more of an experience for those who venture in -- and away from their computer keyboards.

Stores that become a destination or entertain the customer -- whether it's giving them a chance to run on a treadmill or try out an in-store basketball court -- are more likely to survive, says PwC's Barr.

"The retail store is not dead," he says, "but the retail store of the past is dead."