The Retail Apocalypse: Imagined or Real

Some industry analysts have said the so called ‘retail apocalypse’ is simply a figment of the media’s fertile imagination. While others believe the term aptly describes a real-life phenomenon that has caused retail giants such as Toys R Us to stumble and fall, never to rise again. No doubt, there are common factors that caused more than 12,000 brick-and-mortar retail stores, especially large chains, to close their doors in the past eight years. Let’s examine what is causing this shake up in the retail industry at a time when unemployment is low, the economy is growing, and consumer confidence is at an all-time high.

Times are changing

Years ago, filing for bankruptcy was the court of last resort. Today, it’s simply a matter of business for large retailers. To date in 2018, more than 13 prominent retailers have filed for bankruptcy or liquidated. One of these companies is Claire’s, the teen jewelry chain that filed bankruptcy in March. It noted, “The industry as a whole has been challenged by shifts in consumer purchasing preferences and habits.” But, Claire’s is not in this struggle alone. Add Remington, the 202-year-old gun manufacturer to the list, plus Bon-Ton Stores, the owner of Carson’s, Bergner’s and several other well-known chains.

So, what’s going on? Most established chains are over-burdened with billions of dollars in old debt and are now unable to get new financing to keep their companies afloat. Financial institutions are reluctant to lend money to these struggling companies even though it would take just a small percentage of the debt they owe on the balance sheets to help them avoid bankruptcy. And, those lenders who are willing to come to the table want to charge hefty interest rates to ensure a significant return on their investment. This might help initially, but ultimately would make matters worse,

Too much space and not enough customers

Malls in suburban areas are feeling the brunt of store closures. In years past, investors fueled the growth of malls in small communities across America by eagerly funding commercial real estate developments. As a result, there is now an over-abundance of stores in relationship to the population. Supply exceeds demand. Big box stores were born in an era of mass merchandising when people believed “bigger is better.”

Today, people want more personalized service and a store’s size may not be the primary reason customers shop there. Store closures have rapidly accelerated among struggling big box retailers like Sears, as well as those chains that are successful, including
Wal-Mart and Target.

The Changing Face of Retail

This is a volatile time in history and the retail landscape is changing at a rapid pace on both a global and national level. The ripple effect created by the major players that have exited the industry is having a profound impact on the economy, working families and communities. But, it is not the end of the world. Companies have the ability to adapt to new situations. Those with the foresight to master online retailing and integrate emerging technology will exceed their customer’s expectations by carving a new path that can lead the company into the future.

 

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