Tuesday, February 07, 2006


Ever heard of this word now in the boom economy where literally each and ever sector of the economy is doing very well and the global economy seems to be very vibrant. But everything does not seem to be going well for the US retailers who fear store closures as the retail business faces problems.

In one of the articles on CNN, I came across the plight of US retailer’s inspite of retail being one of the fastest growing industries globally. WALMART world’s biggest retailer is also world’s biggest company in terms of revenues and features above giants like Exxon Mobil with net sales of 346 Billion Dollars in the past fiscal year.

As per the research done by the Davidowitz & Associates recently, there are three factors that can be attributed to the downfall of retail stores in US. These are:
  • Growth in Online Shopping
  • High Energy Costs
  • Overcapacity.

Some of the well-known names, which are planning to bring closures of some of their stores, are Zale Corp, OfficeMax, Toy R Us, Musicland Holding Corp. and a few others.

  • Zale Corp., which is set to turn off the lights at more than 30 of its high-end Bailey Banks & Biddle stores.
  • Office supplies seller OfficeMax announced it would close 110 of its 950 U.S. outlets this year as part of its ongoing restructuring efforts.
  • Department store chain Mervyn's plans to close a third of its stores in 2006.
  • Toy seller Toys R Us is closing 75 of its namesake stores, most of them by springtime, and converting 12 others to Babies R Us locations.
  • Music retailer Musicland Holding Corp., which filed for Chapter 11 bankruptcy this month, is considering a "significant number of closings of unprofitable stores" under the Sam Goody and Suncoast names

Some of the factors quoted by the research firm were concerning to the too much overstoring of the retail stores hence it has become a victim of its overcapacity itself. The report also says that there is about nineteen and half square foot of retail space for every shopper in the country. This calls for a debate on the ever-expanding mode of retail stores in US inspite of projections saying that consumer spending will come down in the future. There is actually another component of energy costs, which is actually coming over the head of every retail store.

It is so happening that only big retail stores like Walmart and Home Depot are able to sustain these costs and able to face the competition well. The other factor is the online stores. Online stores recorded sales worth $ 142.3 billion according to ComScore Networks, market research firm. Online stores like Amazon.com, Ebay have largely taken away a big market share of Brick and Mortars store.

Research experts suggest the only solution to this problem is the true convergence of the Online retailing with Brick and Mortar stores. Now just try comparing this problem with the story on Big Bazaar.

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