Retail Bubble

Retail Store ‘Bubble’ Has Burst and CEOs Search for Answers

Multiple U.S. retailer executives will be gathering this Sunday at “Shoptalk,” a conference in Las Vegas for retailers to discuss challenges in the market.

A huge issue awaits discussion at this year’s conference, one that some executives are comparing to the housing crisis of 2008: there are too many stores.

In decades past, opening stores meant corporate growth, and retail companies on the boom were opening as many as they could.

In today’s world of online shopping, too many stores is a problem. Department stores are closing doors across the country and companies are scrambling to transform in a modern world of online retail.

Declining foot traffic and falling profit margins have forced many chains to scale back. Limited Stores Co., RadioShack owner General Wireless Operations Inc. and Gander Mountain Co. have filed for bankruptcy protection this year. Department stores including Macy’s Inc.,Sears Holdings Corp. and J.C. Penney Co. are closing hundreds of locations. Some retailers intend to use the savings to increase their efforts to capture more e-commerce spending.

[…] On a recent conference call, Urban Outfitters Inc. Chief Executive Richard Hayne likened the malaise in retail to that of the housing crisis, blaming retailers for opening too many stores in the 1990s and early 2000s. “Like housing, [the retail store] bubble has now burst,” he said. “We are seeing the results: doors shuttering and rents retreating.”

While companies already comfortable with online sales like Amazon stand to gain from store closures, others are rebranding themselves as digitally leveraged, making technology suppliers ready for a profit.

Among the attendees will also be technology companies pitching gadgets and software to help retailers make better use of their stores, such as fulfilling online orders from backrooms. “It’s about leveraging existing resources,” said Tom Moore, head of retail solutions at Zebra Technologies Corp., which makes tracking technology. “Many brick-and-mortar stores are under a huge transformation.”

The rise of online shopping has, in some cases, encouraged the development of new, digitally-enabled stores. Several online brands—such as Bonobos and Warby Parker—have been expanding into the brick-and-mortar space to boost visibility and sales. Even Amazon has been contemplating various store formats.

Depending on what solutions these companies come up with, we could see more retail stores closing their doors in the years to come.

If you aren’t already familiar with shopping online, perhaps it’s time to learn.

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