Quote:
Originally Posted by Worldwalker
Bookstores don't bring in the same dollars per square foot that, say, mall clothing stores do. Not even close. Look at, say, your typical Old Navy. They have more customers than your typical Border's, and a much higher ticket average (does Old Navy even sell anything that costs as little as a book?), in a fraction of the space.
That's the problem with "market value" ... high-margin clothing stores can afford it, bookstores can't. In fact, if you look at defunct chains over the past ten or fifteen years ... CompUSA ... Kitchen Etc. ... Circuit City ... Linens 'n Things ... Ames ... Lechmere ... Discovery Channel Store ... Nature Company ... and nearly every bookstore known to humanity ... pretty much all of them cited rent as a major reason for folding. Obviously bad management was a factor, too. Phil Schoonover, anyone? But rent was nonetheless a major factor. Even electronics stores, while the sales look big, the margins were thin -- the profit on a big-screen TV can be smaller than on the cable to hook it up. Their real estate killed them.
Every time I drive by an empty building that formerly held a big store, I have to wonder ... is the landlord really making "market rates" from that empty building, the one he's paying heat and light and security on and getting no rent from? I'm inclined to doubt it. I think there are a lot of landlords who look at what an Abercrombie & Fitch in a fancy mall pays per foot and thinks they can get that from Borders or Linens 'n Things, too, because a store is a store, right? And what they get is an empty building bringing in zero.
"Market rates" aren't "market" if the market can't afford them. If retailers have no wiggle room for a down economy, shaky management, market shifts, or other factors without the rent killing them, then they can't afford the rent, even if they're managing to pay it at the moment.
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I think you're describing The Shoe Event Horizon.