The good old days vanished in the retail industry when the Internet became a thing. The days when Sears, Montgomery Ward, and J. C. Penney ruled the industry are just a faint memory now. Those giants were too big to fail until Walmart and Target got enough discount wind under their sales to upend those pillars of the retail industry. But Target and Walmart got a taste of what Joseph Schumpeter, the 20th-century Harvard economics professor called “creative destruction.”
Schumpeter and other economists say capitalism, by its nature, creates retail obsolescence. Companies that change when consumer buying habits change tend to avoid creative destruction longer. But eventually, all retail companies fail, according to some economists. Amazon’s Jeff Bezos recently told his employees Amazon will fail at some point in the future.
Davis Bridal, a leader in the bridal business for more than 60 years, decided to file for Chapter 11 bankruptcy recently. That move will remove more than $400 million in debt from the company’s books. Even though lenders agreed to give Davis Bridal $40 million to continue selling wedding merchandise, some economists say the company lost its consumer appeal. And once that happens, companies bleed money. Sears and J.C. Penney are good examples of that phenomena.
Some retail analysts say companies like Davis Bridal, Brookstone, The Bon-Ton, Claire’s, and the Bebe Stores aren’t relevant anymore because they can’t find remedies for declining store traffic, management issues, liquidity challenges, supply chain malfunctions, and Amazon.
Jeff Bezos Amazon won the title of brick and mortar retail giant slayer a couple of years ago. Amazon built a tech retail platform that conforms to the buying habits of most consumers. The good news is the companies that changed their retail strategy to mirror what Amazon offers consumers are holding their own. But the companies that change part of their retail strategies like Walmart and Target still feel Amazon’s destructive retail appetite.
The list of retailers who dance on the cusp of bankruptcy continues to grow as 2019 rolls around. Retailers like Pac Sun, Stein Mart, Burlington Stores Inc., Men’s Warehouse, Joseph A. Banks, and others are on the bankruptcy watch list in 2019. Consumers won’t tolerate inflated margins and inferior merchandise in the current retail environment. More online retailers make it hard for the brick and mortar stores to survive without some sort of online presence. But even when they throw their retail hat in the online shopping ring they don’t have that online feel of shopping that Amazon created, and that makes them targets for bankruptcy.