Data Dive, The Bad, The Worse And The Ugly Edition: Store Closures, Coronavirus And Bitcoin

There was lots to watch in the world of payments and commerce last week, with red flags flown in physical retail, international commerce and crypto.

Physical Retail Stumbles Into 2020

The year got off to something of a rocky start for physical retailers, as the recent spike in store closures carried on and even picked up strength. Among retailers shuttering large numbers of locations are Macy’s, JCPenney, Papyrus, Express and Pier 1 Imports — all in, physical retailers have reported 1,218 store closures this year already.

And of course, the new year is roughly only a month old.

By comparison, 2019 saw 9,200 stores closed as brands like Payless ShoeSource, Fred’s, Gymboree, Charlotte Russe, Family Dollar, Forever 21, Charming Charlie, Sears, Kmart, A.C. Moore and GameStop either closed down entirely via bankruptcy or radically reduced their footprint. This will be the fourth year in a row that retailers will shutter 100 million square feet of space, which equals about 562 Walmart supercenters.

“This year will generally be more of the same,” said Robin Trantham, a consultant for real estate data tracker CoStar. “We expect many companies — and many sizable companies — to announce closures.”

In fact, some experts are looking at the picture in 2020 to get a bit darker before it gets light. The early days of 2020 have seen foot traffic fall, again in line with the trends of the last few years. In the penultimate week of January foot traffic at U.S. retailers fell 4.9 percent compared to the same period last year — and it was already down 1.4 percent from the previous week.

Morgan Stanley Research Analyst Kimberly Greenberger said the second half of 2020 is expected to be especially challenging with the looming election — as shift and change in national leadership have some tendency to slow commercial activity because spenders get a bit spooked.

The Coronavirus Continues to Cut Down the Chinese Economy

The emergent form of coronavirus that originated in China’s Wuhan region continues to spread and pick up fatalities. As of the start of this week, there were more than 17,000 diagnosed cases within China, and the disease officially has more fatalities associated with it than the SARS outbreak of the early 2000s.

The stock market has been sluggish and weak — and getting more so — as it is looking increasingly like the coronavirus will shut down large segment of the world’s second largest economy for the immediately foreseeable future.

Thus far the closures have been big. Shanghai Disney Resort has closed its doors, stating the closure was “in response to the prevention and control of the disease outbreak.” The closings come after the unveiling of a series of events tailored for China’s Year of the Rat with a “festive makeover” to usher in what is called the “Year of the Mouse.”

Meanwhile, McDonald’s has shuttered eateries in five Chinese cities and is launching new health protocols.

“Staff and customers’ safety is our first priority and we have comprehensive, precautious measures being implemented to all restaurant operations and office staff,” a McDonald’s spokesperson said, according to reports.

Starbucks has also closed over 2,000 locations in China. And in its earnings announcement last week, Apple CEO Tim Cook noted that the firm has mitigation plans in place for the firm’s facilities in Wuhan — but the fate of the entire quarter remains hard to predict at this point, because of uncertainty in the Wuhan region.

Despite the slowing economy, Chinese officials had been hoping people would spend, particularly during the lunar New Year, which is general is a major commerce event. Now, however, given the health risks, the Chinese government is advising residents to stay home in an attempt to arrest the spread of the virus.

Bitcoin and the Cybercrime Boom

The price of bitcoin may be down, and trading activity may have gotten a bit sluggish in the last year, but among at least one demographic group crypto will always be king.

Unfortunately, it seems that group is criminals.

According to reports last week, bitcoin-backed crime was at an all-time high last year. Dark web drug sales were up 60 percent, hitting $601 million from January to March 2019, according to blockchain analysis firm and government advisor Chainalysis. Criminal activity accounted for $3.5 billion stolen from millions of victims in 2019, over three times more than in 2018.

Bitcoin has also been pivotal in the rise in ransomware cyberattacks.

All in, a full 1 percent of bitcoin transactions are connected to crime, doubling the rate from the previous year. It also seems  criminal activity is immune to price fluctuations — no matter what bitcoin is trading for, it is useful for criminals looking to do ransomware attacks, launder funds or evade taxes.

Calvin Shivers, the assistant director of the FBI’s criminal investigative division, said criminal behavior on the dark web is “pervasive” but more resources are being tapped to deal with the issue.

The problem is once the “issue” is dealt with in one place or on one marketplace — it seems to move. Although authorities knocked down two of the biggest criminal markets online recently, new exchanges quickly take their place.

So what did we learn this week? Beware the uncertain and the unpredictable — whether that be a health event or signs that it is time to start thinking very differently if one wants to operate a physical store.

Until next week.