Retail: The Final Frontier?

Retail operating margins were extremely low coming out of the holiday season. There have been boatloads of red ink, numerous store closings and high-profile bankruptcies. And as we all experienced, merchants practically gave their goods away at heavily discounted prices.

Does this signal the end of the retail model as we know it? Despite the fact it’s been the dominant paradigm since The Crusades, retail is inherently inefficient. It’s all fixed expense (vs. variable). Retailers have to bank a whole set of decisions — including how much inventory to stock, space to lease, sales staff to employ, etc. — on their abilities to stimulate and project demand.