The venerable Macy’s and Sears retail chains are struggling. Sears may not last the year. Why? In his Washington Post column Robert Samuelson ponders the question. Here’s his answer:
We have two systems to do one job. Companies have to support the old as well as the new technology. People no longer buy everything in stores, but stores are still necessary. (In 2016, e-commerce totaled about 8 percent of retail sales.) Still, the loss of sales makes brick-and-mortar stores less productive, and their loss of productivity offsets some or all of the gains from digital technologies.
This is, I think, the basic explanation of what’s happening at Macy’s and Sears. They have to invest in the new technology, even as the value of the old technology erodes. The effect is compounded because they’ve been slow to shut marginal stores. There’s always the hope that these stores will bounce back and avoid large losses.
I don’t believe his explanation holds water and it certainly doesn’t explain why Amazon is opening brick and mortar locations.
I think the problem is that Macy’s and Sears are poorly managed. That’s what my experience as a vendor of Sears albeit many years ago tells me. That Sears, the company cut its teeth on catalogue sales, couldn’t figure out that a new kind of catalogue sales had become important, leaving an opening for the upstart Amazon suggests that.
Online is not their only competition. They’re also competing with scads of specialty stores.
Half the time when I go to a brick and mortar retail store I’m told that they don’t have what I’m looking for in stock but I can get it online. To me that doesn’t suggest that they’ve got a technology problem (they’ve already done the investment) but that they’re having an identity crisis.
Brick and mortar stores can compete based on service, based on price, or because you can get what you want now. If they can’t do any of those, they’ll lose, not just to online but to other retail competitors.
Keep in mind that Amazon doesn’t make any money in retail sales, either. The company is making its money providing web services, the infrastructure it built to support its retail operation.
Here’s another explanation: maybe ordinary people, the kind that Sears used to consider its customer base, just don’t buy as much as they used to because they don’t have the money. Retail sales increase when people buy Ferraris, sable coats, and 120 inch 4K flatscreen TVs, too. But you don’t need a lot of physical locations to do that. Just a few very carefully placed.
Notwithstanding general poor management, Macy’s had a service I found very handy during the holiday season- ordering online for same day store pick up.
I shop online a lot, but occasionally find myself in a situation where I need something same day or next day, don’t have time (or desire) to shop during regular business hours, and don’t wish to pay exorbitant shipping fees for overnight delivery. For a few needed items, I was able to browse and choose online when I had time (late night or early morning), choose from the available stock at my local store, and then swing by to pick up the items. The store management also had the good sense to have the pickup stationed in the luggage department, the quietest place in the store.
Like you Dave I’ve been annoyed by brick and mortar stores that don’t keep things in stock, and there are a few retailers where I’ve encountered this frequently. Since the main reasons I go to the store are either need for same day purchases or need to try on clothing for sizing, it really isn’t helpful to tell me it can be ordered online. I greatly prefer the opposite approach- let me shop online as my default but have the stuff available for pickup if I need it faster.
I agree with both you and CStanley. I buy a lot online as well simply because it is much quicker than going around to several stores trying to find what I want.
The biggest problem with the traditional retailers is their inability to innovate, which, as you say, is a management problem. Sears should have cleaned Amazon’s clock, particularly with 1 day or same-day delivery becoming more popular.
I think some of the brick and mortar stores listed are mismanaged. However, the drop in business reasons extend beyond just management. I think these stores are modeled after yesteryear standards, including the kind of merchandise carried by these stores. Society’s needs and tastes have essentially changed.
For instance, I only go to these kind of stores when given a gift card – and then it’s with great reluctance. On-line shopping is simply easier and offers more choices. As for Amazon’s venture into the brick and mortar medium, it will be an entirely different set up and customer experience, combining high tech with hand’s on shopping. Supposedly, there will be few to no clerks involved, and billing will be done more in the mode of on line billing – cashless and put on your credit card.
I have a spoiled, shopaholic daughter. (Shut up, she’s daddy’s baby.) As a family we are all about Amazon Prime. The only meat-space shopping I do is for groceries (and that’s changing). But while she has the same access to Amazon as I do (and believe me, she uses it,) she still ends up almost daily at a mall with her friends.
So it isn’t just about service, price or instant gratification, it is a social function. She and her friends shop actual shops because it is a communal thing. Retail should find ways to enhance the social experience while still in the end showing actual sales. It’s tricky, as Abercrombie and Fitch are discovering, you have to be nimble and quick on your feet to stay with the zeitgeist.
As Reynolds points out, there is a social aspect. Further, there is a substantial market for the ability to touch, feel and see some products in the flesh. A flommoxing problem is the free loader, who goes to the brick and mortar place to see, and then saves a few bucks on line.
You know what they call a golfer who tries out demo clubs at his pro shop then buys on Amazon? An asshole.
It’s important to know what business you’re in. I had a friend who filled his retail shop with easy chairs, created conversation areas, and hosted recitals and concerts. None of that had anything to do with what he was selling but they created an ambiance.
Michael,
I agree it’s a definitely a social experience (lord knows me and my friends went to the mall in the 80’s all the time to chase girls), but teenage girls generally don’t have deep pocketbooks and aren’t going to contribute much to the bottom line of a big, mainstream store like Kohls, much less Sears. Maybe the trendy boutique stores that cater to them – at least those with parents who can afford that crap – but not the anchor stores.