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US Retail Apocalypse: Price-sensitive consumers rather than online-purchasers shape the industry
The term “US Retail Apocalypse” which is used to describe the downsizing trend of some of the largest US retailers is characteristic of the widespread belief that online retail has transformed the structure of the US retail industry by incurably altering the habits of US consumers. However, such an explanation is proved to be extravagant based on statistics and data regarding e-commerce penetration. In addition, the steady growth of discount retailers is one of the facts that disapprove this theory of e-commerce prevalence as a distribution channel and key reason for retail decline. Not only this, but a closer examination of these companies’ financials in comparison to those of well-established department stores that are subject to financial adversities, clarifies one of the reasons for this downsizing trend. Indeed, the rapid expansion of the largest chains of department stores such as Sears and Macy’s has ended being a cost-burden of assets.
Crucially, the change in US consumers’ behavior patterns towards price sensitivity is the source of adjustments in the US retail industry. Accordingly, a price war initiated by Amazon as that is reflected from its suppressed profit margins compared to the ones of large store retailers, is the result or even an additional cause for non-discount retailers to close many stores. In fact, non-discount retailers are unable to follow this price competition at least without inevitable restructuring since their business model was built based on different premises in the past.