By Ryan Velez
The stories of major retail pillars being forced to drastically reduce their stores and workforce have become commonplace as market pressures and online competition grows, and now, this environment has claimed its latest victim – Payless ShoeSource. The company has filed for Chapter 11 bankruptcy and will be immediately closing 400 stores across the U.S. and Puerto Rico.
With the company working “to aggressively manage the remaining real estate lease portfolio,” it is possible that there will be future closures as well. “This is a difficult, but necessary, decision-driven by the continued challenges of the retail environment, which will only intensify,” Payless chief executive W. Paul Jones said in a statement. “We will build a stronger Payless for our customers, vendors and suppliers, associates, business partners and other stakeholders through this process.”
Founded in Topeka, Kansas in 1956, the footwear company has struggled in recent years. Data from Moody’s shows that Payless’s revenue fell 4% between October 2015 and October 2016. This marks nine major retailers who have filed for bankruptcy the first 3 months of 2017. CNBC reports that this “puts the industry on pace for the highest number of such filings since 2009, when 18 retailers resorted to that action.”
Many are quick to point to the rise of online retailing as a reason for this drastic failure. Sites like Amazon and other online retailers manage to offer competitive pricing with better selection and convenience, a combination that is difficult for many shoppers to resist. However, there are other factors at work. Urban Outfitters CEO Richard Hayne notes that the retail market has become oversaturated.
“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,” Hayne said. “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.”
In addition, these stores may be in the wrong places. Many of these retail chains expanded to the suburbs, following the growth of these areas in the postwar era. However, while suburbs are still growing, more and more people are moving back to the cities. Combined with the other issues that retailers are facing, a loss in customer base could certainly tip things over.
Despite these issues, Jones is positive about his company’s future. “We are confident that this process will also enable us to leverage Payless’s existing strengths to succeed,” he said in a statement.