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Shopping trends forcing traditional retailers to downsize

As a number of retailers announce plans to close stores and consolidate operations, vacancy rates are rising at traditional shopping centers and malls.  Macy’s, Sears and Kohl’s all suffered plunging stock prices as they scrambled to deal with holiday sales that fell short of expectations.

Virginia Tech economist Sudipta Sarangi says they are all casualties of the changing face of retail.

“E-commerce and evolving fashion trends are driving factors. This becomes self-fulfilling. Lower sales make it harder to maintain physical stores,” said Sarangi. “Stock prices also fall making it harder for firms to finance physical operations.”

Sudipta Sarangi is a professor and head of the Department of Economics in the College of Science at Virginia Tech​. His fields of interest include applied game theory, experimental economics and development economics.

Much of his current research focuses on issues relating to social networks.

“The demographic that shops in Macy’s is different. It’s mostly older folks,” Sarangi said. “Young shoppers prefer online shopping and also prefer cheaper rapid fashion turnaround in stores like Zara and H&M. Online retailers generally offer liberal return polices and free shipping. Their inventory is virtually unlimited. This is not the case with stores like Macy’s, which have to maintain costly inventory, a large sales staff, and related brick and mortar expenses.”

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