A recent study of e-commerce sales in 2016 shows that too much focus on this channel can hurt some retailers as seen in Neiman Marcus’ plight and Macy’s struggle. Even J. Crew’s high sales online appear to be the result of lack of customer traffic in stores. On the other hand, for some retailers, online business has been a boost to volume and profits.
The new generation of shoppers — millennials and Gen Z — have embraced life with a mobile phone. They talk constantly on their cellphones, shop as cohorts by comparing their finds in stores and buy enthusiastically by pushing a few buttons. In response, retailers are helping their shopping with better apps and free delivery. Some mobile shoppers can also pick-up their selection at a nearby store.
The problem for retailers is that this shopping pattern is making many stores less profitable. Productivity of some specific stores has decreased to a point where units must be written off and should be closed. I know that lease obligations make this much more difficult than it sounds. Mall owners want to keep tenants so that their locations remain viable. There are few viable retail concepts that are looking for more space now.
This new marketplace tension isn’t going away. In fact, it likely will intensify. In my conversations with young shoppers, I found that their buying habits revolve around e-commerce. Shopping online at 11 pm is easier than rushing to a store at high noon and searching for an item that is easy to find on the internet. Retailers are working hard to making their online presence a success.
Below are 36 major retailers and what they have achieved. The listing is based on a study by eMarketer that lists retailers and their 2016 online revenues. I have ranked them by percent of internet sales.
|RETAILER||Internet Sales||Total E-commerce Sales (in millions)|
|Hudson’s Bay Co||13.9%||$1,555|
|J. C. Penney||12.4%||$1,550|
|SPECIALTY RETAILERS||Internet Sales (%)||Total E-commerce Sales (in millions)|
|Abercrombie & Fitch||24.6%||$845|
|The Children’s Place||17.8%||$813|
|Dick’s Sporting Goods||11.9%||$942|
What you see is a very mixed bag when you think about the core customer and the merchandise offerings of these different retailers.
One wonders why Costco, Target and Walmart are not enjoying better business from the internet. A possible answer is that their customers may find the trip to the store worth the effort. They want to see and touch the merchandise to ensure that they will receive value for their money. While I believe that these discounters increase their share of the market from the internet, it just may be that their customers do not want to buy more.
Equally surprising is the fact that some of the specialty retailers like Ralph Lauren, VF Corp and Michael Kors are not pushing for more online business. Maybe their customers like to shop in their stores, but it’s not clear what added sales they miss.
Even as this is all still rather unclear, what is clear that online shopping will reshape the store landscape. Eventually, internet sales will level out. While Amazon achieves a huge percentage of their business through e-commerce sales, I don’t think that will be the case for other retailers. Those with strong leadership who take the time to understand what their target customers want when shopping for their type of products should be able to strike a balance. They will need to redirect some investment in their stores…enough to create an energy that brings traffic profitably. They will have to support their brand, and their merchandise and fashion their image with in-store displays. They will keep customers in their stores through special services and food. My concern is that stores must do this carefully in order to remain productive. Otherwise, they must close.