Microeconomics plays a crucial role when it comes to decision-making activities held by the individual units in the economic sector that affect the particular markets. Different principles microeconomist put forward; however, some tenets are highly discussed these days when pandemics changed the entire economic system. The purpose of this paper is to analyze the article called The Death of the Department Store: ‘Very Few Are Likely to Survive’ and find out how it relates to the fundamental tenets of microeconomics.
The Death of the Department Store: ‘Very Few Are Likely to Survive’ is the article published by two authors, Sapna Maheshwari and Vanessa Friedman, in The New York Times on April 21, 2020. Undoubtedly, the economic losses caused by the pandemic are immense across the world. According to Maheshwari and Friedman (2020), nothing felt worse than the weakened department stores industry. Seeing Macy’s, Lord & Taylors, Nordstrom, and The Neiman Marcus Group crushing down and some of them filing for bankruptcy is unimaginable as those stores were always thriving (Maheshwari & Friedman, 2020). Some university professors suggest that very few of them are likely to survive. At a time when the retailers are supposed to pack multiple orders, cash many checks, and prepare for the planned holiday season, they are forced to short staff, hoard cash, and skim the crisis plans. The authors claim that “the upheaval caused by the pandemic will permanently alter both the retail landscape and the relationships of brands with the stores that sell them” (Maheshwari & Friedman, 2020, para. 6). In general, the situation may even worsen, causing retailor-seller relations disruption and many financial losses.
The number of shops in each chain is expected to decrease. Macy’s representatives declared that they lost around half of their sales for only two weeks. Some retailers took extreme measures and let go of the chief executives, whereas “Neiman stopped accepting new merchandise and furloughed a large portion of its approximately 14,000 employees” (Maheshwari & Friedman, 2020, para. 15). The chain stores are trying hard to sustain the business and not to lose everything. As a result, they cut prices and offered shipping benefits. However, the rate of the order drops has increased despite the provided gains. According to the article, no one knows what the last quarter of the year will bring about, but the experts suggest resorting to Chapter 11 that would alleviate possible burdens. In general, the article aims to depict some critical microeconomics’ critical principles that are exposed to disruption due to the pandemic.
The first tenet that may be observed concerns the firm’s theory, which suggests that any organization aims to maximize its profits and avoid potential losses. The firm typically aims to fill in the gap between the costs and revenues by setting prices and demand on the market. Some organizations pursue to maximize profits either in a short-term or long-term period. Thus, the article may correlate to the theory of a firm for some specific reasons. First of all, the report suggests that all those department chains suffer from enormous losses. Therefore, they are trying hard to somehow restore the profits by creating special offers and sales, cutting personnel, or simply shutting down some of their stores. Moreover, those department stores’ goal was to maximize gain for an extended period. Now, however, they are endeavoring to navigate and adapt their economics in the short term so as not to go bankrupt.
The second principle the article may relate to is the supply-demand model. The law of supply and demand suggests the interaction between the sellers of some item or service and the buyer of this item or service. The law of demand states that at higher prices, the customers will purchase fewer goods. Meanwhile, the law of supply suggests that the sellers will produce and supply more products at higher prices. As the demand for clothes, accessories, shoes and other items has rapidly fallen, the market has weakened. Now, however, both supply and demand have fallen, causing financial losses. According to Maheshwari and Friedman (2020), “across chains, prices for new merchandise sold via e-commerce have already been slashed by 40 percent in some cases” (para. 15). The statement implies that due to the pandemic of COVID-19, the demand for the items and services offered by the malls has dropped. The source also states “some brands said shipments have even been turned away” (Maheshwari & Friedman, 2020, para. 15). It means that the suppliers do not send items to the sellers because it is too expensive
In conclusion, it is relevant to mention that microeconomics principles define different processes on the non-global market; however, they affect it in some way. The article relates to some tenets of microeconomics, such as supply-demand relation and the firm’s goals. Each organization aims to maximize profits and sustain the equilibrium of supply and demand. However, now, no company is insured from multimillion losses. Therefore, the department chains such as Macy’s, Nordstrom, and others are trying to fluctuate on the market while pursuing to create a crisis plan.
Reference
Maheshwari, S., & Friedman, V. (2020). The Death of the Department Store: ‘Very Few Are Likely to Survive’. The New York Times.