Viewpoint: holiday shopping was biggest in years, but not every retailer should celebrate – Sharmila Chatterjee

MIT Sloan Senior Lecturer Sharmila Chatterjee

MIT Sloan Senior Lecturer Sharmila Chatterjee

From Boston Business Journal 

The numbers are in and it’s official: The 2018 holiday shopping season was one of the strongest in years.

Total US retail sales jumped 5.1 percent this November and December from the previous year, according to data from Mastercard SpendingPulse, which tracks both online and in-store spending. American shoppers spent over $850 billion this season.

Not all retailers are rejoicing, however. While total sales were higher than years past, much of that growth is attributable to the rise of ecommerce. According to Mastercard, online sales rose 19 percent from 2017. Department stores, on the other hand, saw a 1 percent decline in sales from a year ago. This follows two years with growth below 2 percent.

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With better leadership, Sears could’ve been a contender – Sharmila Chatterjee

MIT Sloan Senior Lecturer Sharmila Chatterjee

MIT Sloan Senior Lecturer Sharmila Chatterjee

From The Hill

When I arrived in the U.S. for graduate school in the mid-1980s, I asked my host family in a Philadelphia suburb where to shop to outfit my dorm room. They didn’t skip a beat: “Sears,” they said. “It has everything you need.”

To say that I was in awe of Sears would be an understatement. Having grown up in small cities in India that were dominated by mom and pop stores, I’d never seen anything like it. I bought pillows and bed sheets; a hot pot, microwave, a mini fridge; and also rain boots, socks, and a pair of earrings. I remember thinking, “This is the American store of my dreams.”

So last week’s news that Sears filed for bankruptcy struck a personal chord. The company has been under pressure for years: shuttering stores, jettisoning assets and taking on ever more debt. Finally, facing a $134 million payment that it could not afford, Sears capitulated.

The main culprit, according to media coverage, was the rise of online shopping and Amazon. Amazon, of course, has become the familiar villain in these tales — allegedly responsible for the death of many once-dominant American retailers, from Toys “R” Us to Sports Authority to Radio Shack.

But considering e-commerce accounts for only 9 percent of all retail sales, that explanation rings hollow. The truth is, Sears’s bankruptcy is of its own making. Its management, led by Eddie Lampert — Sears’s chairman and its biggest individual creditor and shareholder, made a series of missteps that ultimately crippled the iconic chain.

These include focusing too narrowly on cutting costs at the expense of investing in the in-store experience, spinning off key brands and competing on price.

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Why it’s not the end of America’s brick and mortar retail stores–Sharmila C. Chatterjee

MIT Sloan Senior Lecturer Sharmila Chatterjee

MIT Sloan Senior Lecturer Sharmila Chatterjee

From The Hill

Even in a digital age, brick and mortar retailers have distinct advantages over e-commerce. But the other day, I watched as two stores totally blew those advantages. In a bookstore, the customer waiting in line before me asked for a particular book, only to be told it was out of stock. “We can order it for you,” the customer was told. But she shook her head. “I have books on order. I wanted something to read now.” The second came as I returned an item to a large department store chain, a routine matter — or so I thought. Thirty frustrating minutes later, after being shuttled between employees like a ping-pong ball, I left, wondering why something so simple had taken so long.

Both these incidents demonstrate how the woes facing brick and mortar retailers go far beyond price competition from online shopping. The bookstore I visited had missed its advantage of instant gratification. The department store lost its advantage of convenience and the human touch. An impersonal trip to the post office to mail a return was better by comparison.

My shopping experience underscores three primary factors that underlie the plight of current brick and mortar retailers: retreat from core competence, failure to view online counterparts through a complementary lens, and loss of focus on customer experience. Unfortunately, the results of these missteps are apparent.

Distressed retailers are closing stores at a record pace. According to the Wall Street Journal, more than 2,800 retail locations have closed just this year, including hundreds of locations being shut down by national chains such as Payless ShoeSource and RadioShack. The outlook for major department stores is grim. Macy’s said it will close 68 of its 870 stores nationwide, affecting 10,000 employees, citing changing consumer behavior. Sears Holding Corp. will close 108 Kmarts.

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Artificial Intelligence Will Soon Shop For You, But Is That A Good Thing? – Renée Richardson Gosline

MIT Sloan Prof. Renée Richardson Gosline

From WBUR’s Cognoscenti

We’ve all had bad department store shopping experiences. The aggressively cheerful salesperson. The unforgiving glare of the dressing room. The overstuffed racks of garments where none of the sizes fit, and the ones that do, don’t come in your favorite color.

The advent of online shopping has helped consumers gain more control over their shopping experiences. But digital purchases are often a gamble, too. You scroll through endless webpages to find the perfect boots only to discover your size is on back order for two months. And the items you purchase frequently disappoint: The jacket that looked so elegant on the website’s model looks awkward on your frame.

Retail prognosticators claim that artificial intelligence and other new technologies will offer shoppers salvation. In the not-so-distant future, armies of robots using retina recognition software (à la “Minority Report”) will tailor their sales pitches to your preferences and price point. Voice-activated assistants and digital mannequins will help you to find just the right fit. Shopping from home will be a breeze too: Virtual reality headsets will allow you to “try on” clothes and sample items ranging from a tube of lipstick to a tennis racket. Two-day shipping? How antiquated. In the future, your package will arrive via drones in less than two hours. It may sound like science fiction but, in fact, many stores are testing these innovations and have plans to roll them out to customers.

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The best retailers combine bricks and clicks — Richard Schmalensee

MIT Sloan Professor Richard Schmalensee

MIT Sloan Professor Richard Schmalensee

From Harvard Business Review

Retail profits are plummeting. Stores are closing. Malls are emptying. The depressing stories just keep coming. Reading the Macy’s, Nordstrom, and Target earnings announcements is about as uplifting as a tour of an intensive care unit. The Internet is apparently taking down yet another industry. Brick and mortar stores seem to be going the way of the yellow pages. Sure enough, the Census Bureau just released data showing that online retail sales surged 15.2 percent between the first quarter of 2015 and the first quarter of 2016.

But before you dump all of your retail stocks, there are more facts you should consider. Looking only at that 15.2 percent “surge” would be misleading. It was an increase was on a small base of 6.9 percent. Even when a tiny number grows by a large percentage terms, it is often still tiny.

More than 20 years after the internet was opened to commerce, the Census Bureau tells us that brick and mortar sales accounted for 92.3 percent of retail sales in the first quarter of 2016. Their data show that only 0.8 percent of retail sales shifted from offline to online between the beginning of 2015 and 2016.

So, despite all the talk about drone deliveries to your doorstep, all the retail execs expressing angst over consumers going online, and even a Presidential candidate exclaiming that Amazon has a “huge antitrust problem,” the Census data suggest that physical retail is thriving. Of course, the shuttered stores, depressed execs, and tanking stocks suggest otherwise. What’s the real story?

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