Business

Payless becomes latest victim of retail decline. Can it make a comeback?

Payless ShoeSource announced Tuesday that it has filed for bankruptcy and plans to close 400 underperforming locations. 

A Payless store front is seen in Philadelphia. Shoe chain Payless ShoeSource filed for Chapter 11 bankruptcy protection Tuesday, becoming the latest retailer to succumb to increasing competition from online rivals like Amazon.
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Payless ShoeSource joined a growing number of retailers who have made plans to shutter stores or file for bankruptcy as shoppers move away from strip malls and stand-alone stores to in favor of online shopping.

Filing for Chapter 11 bankruptcy Tuesday, the discount shoe store announced plans to shutter some 400 underperforming stores nationwide and restructure its model, focusing on new products and inventory as well as international expansion, primarily in Latin America.

“This is a difficult, but necessary, decision driven by the continued challenges of the retail environment, which will only intensify,” Payless chief executive officer Paul Jones said in a statement. “We will build a stronger Payless for our customers, vendors and suppliers, associates, business partners and other stakeholders through this process."

He added that the restructuring aimed to help the retailer "remain the go-to shoe store for customers in America and around the globe.”

The shoe company based in Topeka, Kan., currently has 4,400 stores in more than 30 countries.

Payless is just the latest company in a long line of traditional retailers seeking to keep up with changing demands and demographics. Department stores including Macy’s and J.C. Penney, have faltered. Retail brands that boast their own stores such as Ralph Lauren and J. Crew, have struggled as well. This comes as shoppers leave behind suburban malls for the lure of cities, but also as free shipping forces brands to compete with one-stop discount shopping experiences offered by online retailers such as Amazon, where prices are often lower and selections larger.

But this shift doesn't necessarily mean the end to malls and bricks-and-mortar stores is in sight. Instead, companies that leverage online offerings alongside fewer, smaller stores that serve as showrooms and samplings of their full offerings will likely thrive in the future.

"Retailers will still always need some retail locations, but I believe the issue is the size of the locations are going to start declining," Jeff Gleit, an attorney with the New York firm Sullivan & Worcester who specializes in bankruptcy and restructuring tells The Christian Science Monitor in a phone interview. "You do need a store location that’s more of a showroom, but you then have strong internet presence." 

That's where Payless could likely stand to play catch up as it moves to restructure itself, he says.

Several large retailers have picked up on that trend. Target recently announced a plan to shift its focus from sprawling suburban stores to open more CityTargets and TargetExpresses, smaller stores wedged in bustling urban neighborhoods that offer basic groceries, clothing, and other everyday essentials to a group of shoppers who previously had little access to the megastores.

“The retail industry continues to evolve based on consumer preferences and shopping patterns,” The National Retail Federation (NRF) said in a statement to the Monitor. “Retailers are resizing and modifying their businesses by implementing strategies to become more efficient and profitable in the long run.”

Some retailers have tried enhancing the customer experience in stores, either offering amenities such as coffee or revamping their stores with new technology. But those experiments are still unproven; Ralph Lauren, which rolled out an interactive dressing room in its flagship New York City store in late 2015, announced Tuesday it would shutter that location.

Still, with these experimental efforts, analysts believe that traditional companies have an opportunity to compete if they’re willing to evolve.

"This is the pain that the industry goes through when there’s a change happening," Soumya Das, chief marketing officer of Inpixon, a technology company that provides intelligence systems for spaces such as malls and airports, tells the Monitor. He says that online retailers succeed because they better understand their customers through tracking their experience, and that bricks-and-mortar stores can do the same with new technology if they want to see success moving forward.

"As you see the conventional stores closing, you will see unconventional stores opening," he adds.

Pivoting focuses to online sales and bolstering offers there has proved useful for some, like Wal-Mart, which offers products from various third-party sellers on its site. It's unclear if a smaller company like Payless can follow that model. But the company made clear it does not intend to fold easily.

“We are confident that this process will also enable us to leverage Payless’s existing strengths to succeed,” Mr. Jones said.