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A leading fashion retailer in the US, Bebe, announced its intention to close over 160 retail shops across the country. In an article published in CBS News on 21st April 2017, the company expressed dissatisfaction with its performance in the clothing market given the stiff competition from its online contemporaries. According to the article, the company is one among many firms that have recorded dismal sales due to the rise of online consumerism and change in customer preferences. The desperation by Bebe has shaped its recent decision of finding a strategic alternative, often consulting financial advisers to help it with the same. However, this move has not done much in reversing the dwindling sales over the last few years. According to the graphical representation of its market performance, Bebe has seen a steady decline in the total revenue, share price, and subsequently its net profit. The closedown of the stores will translate to a loss of job for 2601 employees distributed all over the country. The exit of the firm from the market also speaks volume about the strength of the online market in the competitive niche. Finally, it is an indication of the impacts of the market exit of a player and its promotion of monopoly.
Bebe employs over 2000 people in its offline stores in the US. Therefore, it is a major economic factor and its closure will have downstream effects on the socio-economic welfare of the people and a mild impact on the national income. It is understandable that the tax paid by Bebe's employees is not so significant in the context of national gross income, but it would make a difference at the micro-level. There are other outcomes of the job loss in the market. The unemployed people will look for alternative means to survive. Some of them may opt to open businesses that resemble that of their former employee. They may adopt the online marketing and shape the supply curve and influence the market prices. The high number of online fashion suppliers will reduce the market price in the long run, making the online market more competitive than before.
The growth of the online marketplace is the new frontier in business. This market is characterized by shifty consumer preferences and unstable demand schedules. The stability of this market is as good as the rate of production of new goods by the manufacturers. Notwithstanding, the online market is a force to reckon with. It has a huge following from both the baby boomers and generation Y. this market is technology-dependent. The entrepreneur with sophisticated technology does best in this kind of market due to their ability to reach out to the highest number of people per unit time. Therefore, it is easy to create an online monopolistic supplier. Online markets are convenient and time-saving. A buyer just needs to make an order through the internet and get the delivery within a short time. The regulation of the online shopping place is not rigid and this can easily result in market failure. The growth of the online market has been positive since early 2000. The growth of Amazon's total revenue since 2004 supports the argument that e-commerce is a promising niche.
Lastly, the exit of Bebe from the offline stores will create monopolies in the market. Transferring sales to the online platform is a new trend for every company that dreads competition. However, it is important to note that there are still consumers that prefer offline stores to e-market. Therefore, firms willing to persevere the low sales will stick to the offline markets leading to monopolies in some segments. Since clothes are normal goods whose sale adheres to the law of supply and demand, the persistent offline businesses will always make sales when the quantity demanded in the online shops exceeds the supply. The supply curve in the offline market will, therefore, shift to the left as the price of offline commodities increases. In a nutshell, the increase in the e-commerce is a blessing in disguise for small players who still want to maintain the offline presence.
In conclusion, there are three economic impacts of the exit of Bebe and all businesses in general from the offline market. The loss of employment for many people is the immediate effect. Currently, Bebe employs more than 2000 people who will lose their jobs once the company exits the market. Some former employees of this company may start online clothing shops as a fallback plan. Bebe will thus experience competition even in the online space. Since Bebe is following the trend of other companies that are tired of struggling with demand in the physical market, there will eventually remain few resilient offline market players that will prove beneficial at the end. Due to the rise of online consumerism, the supply of goods in the e-market will decline and may increase their prices in the long run. The few remaining offline shops will thus make remarkable sales in such cases.
Picchi, Aimee. "Bebe to Shutter All of Its Stores." Cbsnews.com, 21 Apr. 2017, www.cbsnews.com/news/bebe-stores-shutting-down/.
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