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Has the retail bubble burst?

By Don-Alvin Adegeest

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Fashion

London - We often hear about the dotcom bubble bursting in 2000, when all things tech took a nosedive and investors lost colossal amounts of cash. More recently the property bubble took a hit. What goes up must come down, even in business, where skyrocketing growth reaching early peaks can come crashing back down.

The next bubble that may be about to burst is that of retail. According to Urban Outfiters chief executive officer Richard Hayne. "Our industry, not unlike the housing industry, saw too much square footage capacity added in the Nineties and early 2000s.Thousands of doors opened…and created a bubble and like housing, that bubble has now burst,” he said. “We are seeing the results, doors shuttering and rents retreating. This trend will continue for the foreseeable future and may even accelerate,” he told the Wall Street Journal.

The American market is saturated

“The U.S. market is oversaturated with retail space and far too much of that space is occupied by stores selling apparel,” said Hayne, noting America has six times the retail space per capita of either Europe or Japan.

In response Urban Outfitters will focus on its digital landscape, curbing its expansion plan with 15 new stores opening instead of 29 and keep its brand portfolio fresh. Customers are constantly looking for newness, Hayne states, even in months like January which are traditionally reserved for clearing stock and sales.

“Our highest priority is where we've had the most recent success, digital. Last year we made many improvements to our capabilities in this channel. We developed a single platform for all brands. The company more scalable and efficient in developing and growing on front-end enhancements across all brands, both on mobile and on web sites. We have improved our functionality around check-out, payment, search, inventory visibility, in-store pickup, ship-to-store, mobile capabilities and speed on all web platforms.”

According to WWD Hayne was careful to say the company — parent to its namesake brand as well as Anthropologie and Free People — was not abandoning retail, but is viewing stores as an equal partner with the web.

Last year, Urban’s earnings fell 2.8 percent to 218.1 million dollars.

Amazon survived the dotcom crash

Of the few businesses that emerged from the ashes of the bubble burst was Amazon, who went on to dominate the online retail market. In many ways, Amazon is the first-mover in nearly all innovation when it comes to online retail and logistics involved in it.

That online retail is another bubble which saw rapid growth does not mean it will follow in the footsteps of the earlier dotcom crash.

The current state of online retail logistics is one of immense and rapid growth.While the likelihood of it mimicking a dotcom bust of the magnitude we saw in the early 2000s is unlikely, it is incumbent on businesses that deliver, especially those that are either online retail stores themselves, or the third parties that deliver for them, to embrace the kind of technology and operational overhaul needed to remain relevant in a constantly changing environment.

Photo credit: Urban Outfitters Covent Garden, source: Wikimedia Commons

Urban Outfitters