Retail Glut: Worrisome American retailers added 3 sq. ft. of new store space during the ‘90s for every man, woman, and child in the U.S., finds research firm F.W. Dodge. That 20% growth rate was double the rate of population growth during the decade. As space grew, the industry became less productive. Average operating profit margins for retailers, after rising slightly to 3.97% in ‘96, fell each year thereafter to a negative 0.17% in ‘00, even as consumer spending accelerated, according to U.S. Bancorp Piper Jaffray. For most of the 5 years through ‘00, total retail sales growth, excluding autos, grew at a faster rate than sales at stores open at least a year, according to Bain & Co. When total sales grow faster, it suggests new stores are cannibalizing sales at existing stores, lowering overall productivity. Indeed, total sales growth outstripped existing-store sales growth every month during ‘00 and the first 6 months of ‘01. (BW 11/30/01)
http://garydfoster.com/