Times are tough for the retail sector, with an ever-increasing number of stores forced to shutter their doors and companies increasingly relying on sales and discounts to get customers through the door. While a lackluster retail market often is blamed on a lagging economy, according to some, this decline doesn’t have anything to do with the economy. Rather, the market is simply oversaturated.
The U.S. market is oversaturated with retail space, and far too much of that space is occupied by stores selling. Richard Hayne, CEO of Urban Outfitters, said last week, going so far as to compare the decline of the retail sector to the housing industry crash in 2008. Retail square feet per capita in the United States is more than six times that of Europe or Japan. And, this doesn’t count digital commerce. Our industry, not unlike the housing industry, saw too much square footage capacity added in the 1990s and early 2000s. Thousands of new doors opened and rents soared. This created a bubble, and like housing, that bubble has now burst. Haynes argued that because of this oversaturation, the trend will only get worse before it gets any better.
So, what is the solution to the problem? Well, many argue that the only way out of the predicament is more store closures. For example, a report published by Green Street Advisors in 2016 argued that department stores across the U.S. would need to close a total of 800 locations cumulatively, or about one-fifth of the current anchor space at malls across the U.S., to restore levels of productivity seen a decade ago.
The bottom line? There is no doubt that the retail market is suffering, and the industry as a whole will need to successfully make changes in order to stay profitable.
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