NEW YORK (AP) -- Even with the liquidation of such big names as Montgomery Ward and a rash of store closings from the likes of Kmart, America is still overstocked with retailers, particularly department and apparel stores that are turning consumers off with uninspiring merchandise.
In fact, even as consumer spending begins to recover from the recession, people are still choosy about where they shop, sticking to savvy discounters like Wal-Mart, and are not likely to return to the carefree buying that defined the mid-to-late 1990s and fueled a frenzied store expansion. That will mean a continued retail shakeout that's expected to accelerate this year and in 2003 before tapering off.
''We are still significantly overstored,'' said Burt Flickinger, III, managing director of Reach Marketing in Westport, Conn., who believes there is at least 15 percent to 20 percent more retail square-footage in this country than consumer demand requires.
''There is no question that the consumer is different from today than she was a decade ago, '' said Kurt Barnard, president of Barnard's Retail Trend Report, based in Montclair, N.J. ''The consumer is smarter and more sophisticated, and understands value better than ever.''
Given changing consumer spending habits, Barnard noted, ''The entire retailing industry is undergoing a profound transformation with market share shifting from one segment to another.''
Wal-Mart, Target and moderate-priced chains like Kohl's, with their low prices and exciting merchandise, all continue to outperform the retail industry, generating strong sales gains. Wal-Mart plans to expand its square footage by 9 percent this year, following an 8 percent increase last year.
The big exception, of course, is Kmart, the nation's third-largest discounter, which has long struggled with cluttered stores, inefficient operations and a fuzzy identity. It's now struggling to restructure in bankruptcy and will be shuttering 284 store in what some analysts believe will be just the first round of store closings.
The increasing clout of the discount sector has pulled business away from department stores and apparel retailers, which are trying to figure out a magic merchandising formula to entice consumers.
The big problem, Barnard said, is shoppers are now ''less enamored with famous designer names and big brands''-- a business that fueled sales at department stores in the mid-to-late 1990s. Now, these stores are aiming to differentiate themselves by fortifying their own store brands, but their efforts may be not enough.
Lower-priced competitors are moving along with exclusive merchandise that have proven to be big traffic drivers. Cheap chic retailer Target is now turning to a roster of designers, like Mossimo Giannulli, whose dresses sell for $22.
As department stores industry are increasingly under pressure from discounters, rumors about consolidation in the sector have only increased. There has been even talk about the possibility of a merger between Federated Department Stores and May Department Stores, although some analysts like Barnard view the scenario as unlikely.
The consolidation of large retailers could drive down costs for shoppers and improve profits by allowing the merged company to negotiate lower prices from its suppliers.
The death of the founder of Dillard's Department Store Inc., William T. Dillard Sr., has prompted some talk on Wall Street that management might be ready to sell the chain.
Already this year, Jacobson Stores Inc., a 20-store department store chain in Jackson, Miss., filed for Chapter 11 in January -- and its fate is uncertain.
''Jacobson's was no longer relevant in the marketplace, as Target and Kohl's took over,'' said Frank Badillo of Retail Forward, a retail consulting firm.
Meanwhile, Badillo and other industry analysts are closely watching specialty apparel stores, particularly Gap Inc., which just reported its second consecutive quarterly loss and has been struggling for two years. The chain operates 4,176 stores, and has reduced its expansion pace, but Badillo expects that may not be enough. He believes there will be store closings by yearend, particularly at Old Navy and Gap.
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