Payless ShoeSource is the latest retailer to succumb to the slowdown in the retail sector and file for Chapter 11 bankruptcy. The company has struck a deal with its lenders for debtor-in-possession financing and will also restructure operations by shuttering 400 stores.

Data from government agencies suggests that disposable incomes have increased and so have personal consumption expenditures over the past 5 years. For that matter, retail sales have been growing during the period. So if customers have more money to spend and are actually spending it, why is it that retailers are struggling?

Changing Shopping Habits

The elephant in the room is the American consumers' tectonic shift to online shopping. Census Bureau data shows that e-commerce retail sales have more than doubled in absolute terms to $102 billion in the last quarter of 2016 and taken an 8.3% share of total retail sales up from 5% just five years ago.

A survey by National Retail Federation shows that on Thanksgiving and Black Friday last year, two most popular shopping days in the year, 44% consumers shopped online as opposed to 40% who made a trip to the stores.

Declining foot traffic in stores is forcing retailers to offer margin squeezing promotional offers to entice customers, pushing themselves further in the red as they try to compete with the likes of Amazon.com Inc. (AMZN).

Huge Debt

With approximately $665 million in debt, Payless reportedly explored the possibility of restructuring its loans earlier this year. Speaking on unsustainable levels of debt, Sears Holding Corp.'s (SHLD) debt exceeded the company’s market cap in 2014. As of January 2017 that debt stood at $4.2 billion. (See also: Who Killed Sears? 50 years on the Road To Ruin.)

J. Crew, another struggling retailer that hasn’t gone off the edge yet could be in big trouble soon enough. The company has amassed $2 billion in debt, some of which according to Bloomberg will become current next year putting it under pressure.

In February this year, The Wall Street Journal reported that credit ratings agency Moody's labeled debt of 13.5% of the retailers it covered as “speculative, of poor standing and subject to very high credit risk.” (See also: How Zombie Retailers Are Dragging Down The Industry.)

Cutting Costs

Desperate to make ends meet retailers are doing all they can to cut back on costs, from closing stores to selling family silver. Earlier this year, J.C. Penney Company Inc. (JCPsold its sprawling Texas headquarters for $353 million to help pare down some of its $4.5 billion debt. The company will also close down 138 stores this year.

Retailers are also making a push for online sales and eliminating their brick and mortar presence. Companies that have announced store closures include Macy’s (M) with a tally of 68, Sears with a figure of 150, hhgregg with 88 and Abercrombie & Fitch Co. (ANF) which will close 60. Other apparel brands like The Limited have decided to shut all of their existing 250 stores according to Fortune.

Challenges Ahead

But even as retailers get their houses in order, the head winds that rattle their operations are far from over. President Trump's proposed border tax and his stance on renegotiating trade agreements such as NAFTA, could put the ailing retailers in a world of pain. The National Retail Federation has said that the proposed border tax could increase the price burden on consumers to the tune of $1,700 per household in the first year alone.