The hits keep coming for brick-and-mortar retail.
Locally, three big-box retail stores have been affected in recent weeks following lackluster holiday sales.
The last Springfield Kmart and another in Branson are closing after Sears Holdings Corp. (Nasdaq: SHLD) announced plans to shutter 78 Kmart stores and 26 Sears locations. That was on top of news in December the holding company would close 30 Kmart locations and 16 Sears stores in the spring.
The Limited store inside Battlefield Mall also is a casualty. Boca Raton, Florida-based ownership group Sun Capital Partners Inc. is closing all 250 of the women’s apparel stores, eliminating 4,000 jobs. The Limited’s website made a point to note online sales will continue.
While no local stores are affected, Macy’s Inc. (NYSE: M) too signaled it would shut down 68 stores and lay off 10,000 workers.
The loss of jobs, particularly from such American staples as Sears and Macy’s, is concerning, but the moves logically follow a broader trend.
As with manufacturing, construction, restaurants, banking, newspapers and many other industries, technology is shaping the way retail operates.
In this case, it’s really darn tough to beat the convenience of online shopping. And when I say shopping online, you probably know who I’m talking about. Amazon.com Inc. (Nasdaq: AMZN) has the means to put brick-and-mortar stores to bed. Then there are online competitors like Alibaba and Newegg seeking their share of sales.
Check out the offerings – beyond tech, movies and video games, Amazon has everything you need from food to kitchenware to clothing and auto parts. Anecdotally, I’ve found prices to be comparable if not better than retail stores.
The Amazon Dash Button took it to the next level. Place the button in any room of your house, and if you need a refill of Charmin, Diet Coke or other items, you just push the button and it’s sent to you after a quick email confirmation. That’s about as simple and convenient as shopping gets.
Fourth-quarter and year-end earnings results for Amazon, Sears Holdings and Macy’s haven’t yet been released, but I took the latest data, industry projections and news reports to see where they all stack up.
In the third quarter, Amazon posted a 219 percent increase in net income to $252 million. Sears, on the other hand, posted a net loss of $748 million that was 65 percent worse than the same quarter a year prior. And Macy’s net income dropped 87 percent to $15 million during the three-month period.
Following the holidays, clear winners appeared. Amazon reported it had its best holiday season to date, shipping more than 1 billion items worldwide. Same-store sales at Sears and Kmart for the first two months of the fourth quarter declined by 12-13 percent, according to a news release. Macy’s indicated its same-store sales in November and December fell by a combined 2.1 percent compared with the prior holiday season.
Companies with better, more convenient service will win the retail battle. But there’s also certain factors like nostalgia to consider. Many still like to feel products in their hands before buying them. There are, of course, some shoppers that use stores like Best Buy or clothing retailers to try before they buy, so to speak, and then proceed to purchase the items online at a lower price. The concept even has its own name: “showrooming.”
Unless current trends change, the power of the internet likely will spell the end of brick-and-mortar retail. But it will be a slow burn.
A customer survey released in October by the National Retail Federation found a nearly equal number of shoppers were planning to shop online, in department stores and at discount retailers.
There’s also something to be said for shopping locally. Springfield, for example, has a bevy of locally owned retail that’s crucial to our city’s economy. The more local flare, the more people will visit the city, spend money and contribute to crucial tax revenue. Plus, Springfieldians are quite loyal to their own.
But much like Uber’s recent entry into the Queen City, convenience will win. Of course, many retailers realize this, and smartly offer their goods on the internet as well. Walmart.com, for instance, has a highly viable website complete with features like free shipping on larger orders. However, with the one-stop shop nature of Amazon, it’s difficult to persuade customers to look elsewhere.
As have other industries, retail must adapt to the changing ways of the world. People will always need products. It’s just a matter of which companies can best use the internet to capitalize on that fact.
Web Producer Geoff Pickle can be reached at gpickle@sbj.net.
