Retail Store Closings Reflect Overcapacity, Online Competition

Sunday, 09 Mar 2014 05:42 PM

By Dan Weil

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It's not a good time to be a retailer with a brick and mortar presence.

Staples announced Thursday that it will close 225 stores, and Radio Shack said Monday that it will shutter as many as 1,100 stores.

Other beleaguered retailers already have announced store closures, with Sears Holdings expected to eliminate 500 Sears and Kmart spots soon, Cowen retail analyst John Kernan tells CNNMoney.

Editor’s Note: These 38 Dates Are Key to Bagging $313,038

The fundamental problem is overcapacity, some experts say.

About 46 square feet of retail space exists for every inhabitant in the United States, five times more than in any other country, Robin Lewis, CEO of The Robin Report, a retail strategy newsletter, tells CNNMoney.

"We've had overcapacity in this country for a long, long time," he said. "The economy now has gotten to the point where it is forcing [retailers] to contract."

Competition from online retailers such as Amazon is having an impact. "It is too simple to say this is what Amazon has wrought," Greg Apter, president of Chicago-based Hilco Real Estate, told CNNMoney. "But the online business makes the market more saturated. That's enough to turn what might have been 100 store closings into 120."

As for Staples, the carnage may not be over, says Brian Yarbrough, a research analyst with Edward Jones.

"I wouldn't be surprised if there's a couple hundred more [stores] that need to be closed," he told USA Today. "The problem at the end of the day is every product they sell, you can go on Amazon and buy. And Amazon prices are just cheaper."

Editor’s Note: These 38 Dates Are Key to Bagging $313,038

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