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Current economic moment could spell “catastrophe for retailers”

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The exterior of a Kohl's department store.

Kohl's had been in negotiations to be bought by the Franchise Group but decided to end those talks. It's part of an industry that's struggling with difficult conditions. Justin Sullivan/Getty Images

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The retail chain Kohl’s — home to everything from American flag T-shirts to patio furniture — said Friday morning that it’s no longer for sale. It had been in negotiations to sell itself to the Franchise Group, owner of brands that include the Vitamin Shoppe, but said it was ending those talks.

One reason it gave is the current retail environment. It’s not the only big retailer facing challenges; Bed Bath & Beyond announced this week that it’s getting a new CEO.

Retailers have lots of practical reasons to worry that customers will stay away: inflation, rising interest rates, the wrong inventory and continuing supply chain problems.

“You basically have this environment that could spell, you know, catastrophe for retailers,” said Sucharita Kodali, a retail industry analyst at Forrester.

Which means retailers have to figure out how to get through the current economic moment and maybe ask themselves some existential questions. 

“Why do you exist? is a really good question,” said Brian Kilcourse, a managing partner at Retail Systems Research. “And I think Kohl’s probably is struggling with that. Why do they exist?”

One reason to exist, Kilcourse said, is to provide a place to gather. There’s a particular hunger right now among consumers to get out, and if big-box stores can offer a feeling of community, that could help bring people in. 

“Stores are a social place. It’s where we meet,” Kilcourse said. “People like to shop. It’s an old human behavior.”

To make sure there’s inventory for those humans to buy, some retailers are investing in demand-forecasting software powered by artificial intelligence. 

“There’s solutions that use cameras to literally, you know, computer vision to watch what’s on the shelf, see if it’s in stock, tell another system that it’s not in stock and then that other system can order,” said Laura Kennedy, an analyst at CB Insights.

Kennedy added that retailers are also investing in technology that makes it easier to change prices — which is another way to keep up with the times. 

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