Changing Landscape of Retail

Pre-Covid, in the heydey of the start-up world, taking on debt seemed to be business as usual. But it rarely ends well when you can’t meet your debt payments.

One company that I invested in, the darling of secondary market investors, I know because I would get an email every week from someone looking to buy my shares. The good news is I sold a portion early on, getting a solid return, so the rest was just gravy. I turned down all the secondary requests. No regrets.

Fast forward, I get an email from the CEO of another company I invested in to inform everyone that the amount of debt they took on sunk the ship. The question is, what was the board thinking about taking on that much debt? Were they not reading the future landscape? Could they have cut back and got to profitability?

Last week, I read that Mitchell + Gold, a well-known furniture company, abruptly shut down. A few others in the furniture space have shut down, too. All were owned by private equity firms who supposedly could not secure more funding. Unfortunately, that is how too many companies functioned over the last decade. Not profitable, but plenty of cash to continue to grow, grow, grow. That time is over.

I have been espousing the end of department stores for years, but it appears there will be some significant downscaling or massive mergers. Will Saks and Neimans merge and have only a few stores that can produce profits? Will the large fashion brands find themselves with too many of their stores, including having that merch in department stores, start to ebb?

We have entered a genre where consumers are interested in individuality. The return to an easier life in the post-Covid world is changing consumers’ behavior. More people are starting small businesses that connect with the community.

What might happen in the months ahead in the retail world, particularly with commercial real estate owners who have taken on massive debt, will hopefully help a new generation of retailers afford the rent. What a concept!