How E-commerce Is Making Stores Relevant Again
After
a tough holiday season, many big- box retailers went on a cost-cutting
binge. J.C. Penney, Macy’s, and Sears all announced
that they would shutter dozens of stores each as shoppers increasingly shift
online. But the carnage could have been much worse. Oddly enough, it was that
very shift to e-commerce—the one bright spot for most retailers during the
holidays—that spared even more stores from the reject rack.
The
counterintuitive strategy boils down to this: If traditional retailers have any
hope of countering Amazon’s dominance, it’s by using their brick-and-mortar
stores as local arms of their online businesses. Whether or not that’s
ultimately successful, a number of retail CEOs touted the idea during recent
earnings calls.
Kohl’s,
which had record online sales over the holidays while its overall business
slumped badly, says that one-third of online orders are now either picked up in
its stores or shipped by one (shaving a half-day off its average delivery
time).
At
J.C. Penney, 90% of e-commerce returns are handled in a store, giving the
company another chance to wring more sales from those customers.
And Target says
three-quarters of Americans live within 10 miles of one of its stores, an edge
that it claims will help it deliver online orders more quickly to shoppers who
increasingly want their merchandise in a couple of hours, not a couple of days.
Kohl’s
says it has data to back up the theory that brick-and-mortar stores help online
sales. Last year, after closing 18 stores, it found that online sales at nearby
addresses fell 10%, as some shoppers forgot about the chain altogether. Based
on those findings, Kohl’s plans to shrink 200 stores instead of closing any of
them.
Meanwhile,
retailers like Best Buy believe that
more technology will lift store sales. For example, Best Buy has armed workers
with handheld devices that can show customers whether nearby stores have a
particular TV that is otherwise out of stock. “In the stores, technology can be
our best friend,” says Best Buy CEO Hubert Joly, whose company has avoided
closing stores in recent years.
See
more: How Alibaba's Jack
Ma Is Building a Truly Global Retail Empire
Still,
the inescapable reality for retailers is that store sales are falling faster
than e-commerce can make up for. In the end, retailers may only be postponing
their day of reckoning.
High
real estate costs in prime locations make it expensive to keep stores open,
says Joel Bines, cohead of retail for consulting firm AlixPartners. E-commerce
warehouses, in contrast, are typically built on cheap land and where wages are
low.
Says
Bines: “The wave of store closings we’ve been predicting for years is upon us,
and it’s going to last for many, many years.”
A
version of this article appears in the April 1, 2017 issue of Fortune.
Phil Wahba
http://fortune.com/2017/03/30/e-commerce-brick-mortor-stores-retail-shopping/
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