E Retail Moving In The Wrong Direction

An alarming trend is developing that is moving in the wrong direction, and that is store closures. The biggest losers, from a humanistic perspective, are the employees who lose their jobs when stores close, but as an economist I want to have a look at what is causing this as well.

Most people, when asked “Why are so many stores closing, like Kmart, Payless, Sears, and Gymboree?” They’ll probably answer, “It’s the Amazon Effect.” What that means is they think that the only thing responsible for retail stores closing is internet sites like Amazon, Overstock, Wayfair, and others, are the reason, and nothing else really has any kind of impact except for Amazon type websites.

How about this as a reason…after over 100 years, Lord and Taylor recently closed its flagship store in Manhattan, and they cited the reason as the high expenses of keeping it open. They’ve seen many costs rising too rapidly in recent years, including their lease and wages.

Another cause is company executives making bad business decisions which lead to closing operations or bankruptcy, which typically leads to closing operations.  A good example is Toys r Us.  Their bad decision was outsourcing internet sales to Amazon.  So Amazon got to learn how to sell and ship toys at Toys r Us expense, quite literally. 

How about Blockbuster?  It’s pretty well known, especially if you listen to Gary Vee, that when Netflix started out, Blockbuster did a study that said people prefer to go to the store to rent movies because they like to open the video box and take out the tape. Really? Are you kidding me? And the second reason they didn’t see Netflix as a threat? The possible chance of being seen at the movie store by friends and neighbors. Company execs get a 10/10 on my whiskey-tango-foxtrot meter. Obviously Netflix won that battle because it seems that most people would rather lie in bed in their pajamas and take a minute or two to pick what they want to watch, rather than wasting 30-60 minutes going to the store and the possibility that the movie they want is not available to rent.

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Disclaimers: The contents of this article are solely my opinion, and do not represent neither the opinion of this website nor its owner(s), nor any employer whether by contract or for wages.  ...

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