Vanessa Quirk interviewed Mark Pilkington, author of Retail Therapy, Why the Retail Industry’s Broken and What Can Be Done to Fix It.

“Retailing is a very, very, very difficult business. It’s a high-fixed-cost business model. You’ve got your stores, rent, people, stock, all sitting there. And if you don’t do a certain level of turnover, it’s gonna start killing you very, very quickly. If you look at most retailers’ accounts, you only have to lose 10 or 15 percent of the sales in most stores to become unprofitable. So you don’t have to lose all the business, you just have to lose the top slice of the business. And that top slice of business has started to evaporate. They can go bankrupt really, really easily, they just run out of cash.”

“And during the period of 2010 to 2015, a lot of the big retailers over-expanded. A lot of them were owned by venture capital companies who wanted them to expand very fast, and they took on a lot of debt to do that.”

“The crisis has now moved from the retailers to the landlords. With the big retail players, the landlords’ business model was to borrow money long-term against these very regular, reliable, five-to-ten-year leases. And the income was pretty sure. With retailers going bust, it’s really disrupted their business model, and a lot of them are starting to run out of money, and starting to suffer, because they can’t fill the spaces.”

As an aside, not mentioned in the article, Google has leased the Westside Pavilion (a dying shopping mall in Los Angeles) for use as office space.

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