Sharmila C. Chatterjee, Senior Lecturer, MIT Sloan School of Management
From USA Today
As the unofficial start to holiday shopping approaches, retail prognosticators are calling for a holly jolly season for e-commerce—and a less merry one for brick-and-mortar stores.
This year, for the first time, American consumers plan to do more of their holiday shopping online than in physical stores, according to PricewaterhouseCoopers. A Deloitte study predicts that customers will spend on average $879 online and $541 in shops.
Based on these forecasts, e-commerce appears in prime position to soon dominate the holiday retail landscape. We can kiss goodbye traditional stores. Right?
Not so fast. Brick-and-mortar stores are making a comeback. By focusing on customer service, integrated business models, and innovative partnerships, many chains — including Target, Kohl’s, Madewell and Best Buy — are likely to post strong holiday sales. Meanwhile, e-commerce may be in for a reckoning. Signs indicate that the lightning fast delivery speeds customers have come to expect from internet vendors, namely Amazon, are not sustainable.
How can a department store survive in the age of digital shopping carts and free home delivery? It’s a question that some of even the most iconic retailers struggle to answer.
As a result, many are closing up shop. Last month, for instance, Macy’s identified seven stores for closure as part of its previously announced plan to shutter 100 locations nationwide. In November, Sears said it would close 63 stores on top of the 350 that it announced would shut earlier in the year. And last summer, J.C. Penney closed about 140 of its stores around the country.
Closing less-profitable locations makes a lot of sense, but that alone is not enough. What’s needed is a reinvention of the traditional bricks-and-mortar model. Stores must rekindle the magic of department store shopping by providing a holistic customer experience, one that’s efficient and satisfying from a purchasing point of view, but also engaging and exciting.
For starters, brick-and-mortar stores need to change how they view their online counterparts: digital stores should be seen as complementary forces rather than competitive ones. Shopping in the future will be a blend of the electronic and physical realms. Read More »
We’ve seen the downfall of many bricks and mortar stores over the last decade, including Borders, Circuit City, and most recently, RadioShack — to name just a few. As e-commerce continues to rise, it’s seemingly becoming more difficult for traditional stores to stay in business.
It’s true that online shopping has significantly grown over the last 10 years. Even in the last year, we’ve seen a noticeable uptick. According to the U.S. Census, total e-commerce sales for 2014 in the U.S. were estimated at $304.9 billion, which is a 15.4% increase from 2013. However, plenty of bricks and mortar stores are still healthy. Is it fair to blame e-commerce for every store closing and bankruptcy?
As a U.S. bankruptcy judge on Tuesday said he would approve a plan by the electronics retailer to sell 1,740 of its stores to the Standard General hedge fund and exit bankruptcy, it’s worth taking a closer look at why RadioShack failed. E-commerce wasn’t the only culprit. One big mistake involved poor strategic decisions over its financials. Feeling undervalued, the retailer bought back $400 million in stock in 2010 when its net profit was $206 million. It did something similar in 2011 when its net profit had declined to $72 million and it did another buy back for $113 million. In the end, it spent more than $500 million trying to push up the stock price.