The Next Retail Revolution
Brooks Brothers. Lord & Taylor. J.Crew. Ann Taylor. Sur la Table. Lucky Brand. J.C. Penney. Neiman Marcus. GNC. A long list of retail names has ended up in bankruptcy court this year, and some mall owners are likely to follow. By one estimate, 25,000 U.S. retail stores could close this year. If you believe what you read, traditional retailing is in its death throes, and online sellers, led by Amazon.com, own the future.
I disagree. In fact, I think store-based retailing has a promising future.
Obviously, retailers have been hit hard by the pandemic; many of them asphyxiated when they were forced to keep their stores closed for extended periods. Yet blaming the current crisis in retailing on COVID-19 is far too simple. Most of these companies were in trouble long before the coronavirus came along. Some might have survived had they not fallen into the hands of vulture investors who loaded them down with debt. Others unwisely defined themselves as mall-based retailers, a fatal mistake given that even teenage girls seem to have lost interest in hanging out at the mall.
So why am I bullish on retailing?
First, the vast number of empty storefronts undoubtedly means that retail rents are plummeting. Only yesterday, commercial property owners were in the driver’s seat, especially in prospering urban centers; now, landlords are offering deals everywhere, and some may be desperate enough to rent to independent local merchants they might previously have snubbed. This makes it feasible to test retailing concepts that were not viable when rents were higher.
Second, the demise of so many venerable names long past their prime, precluded from innovating by the incessant need for cash to service exorbitant debts, has created space for entrepreneurs with new ideas. These are likely to be people who’ve grown up in the virtual world and understand that online shopping is here to stay. They will shape their stores to offer experiences and services that will never be available on Amazon and eBay, and will draw customers who value shopping as an in-person social activity that the internet cannot provide. The best will fully integrate their physical stores with their websites, something still beyond the capabilities of many bricks-and-mortar retailers.
With the pandemic still raging in many places, it’s probably too early for these new retail shoots to sprout. A year from now, though, the landscape may look quite different.Tags: bankruptcy, property