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It doesn’t take a rocket scientist to identify the obvious trend away from brick and mortar in favor of online purchasing.
Store closings, layoffs, and predictions of doom haunt many traditional retailers such as the Sears Holding Corporation (parent entity for both Sears and Kmart and an employer of 140,000 people).
In a recent SEC filing the Sears Holding Company noted that it is selling property (e.g. in March 2017, they sold the Craftsman brand to Stanley Black & Decker) and engaging new creditors all in an effort to stave off continued revenue challenges like the $2.2 billion they lost last year alone. The filing also suggested, to no one’s surprise, that:
“The retail industry is changing rapidly. The progression of the Internet, mobile technology, social networking and social media is fundamentally reshaping the way we interact with our core customers and members. As a result, we are transitioning to a member-centric company.”
According to that filing, likely success of that transition (which has been slow) at Sears is perilous:
“We must anticipate and meet our members’ and customers’ evolving expectations, while counteracting developments by our competitors and striving to deliver a seamless experience across all of our sales channels. We may need to adjust our strategic initiatives depending on our members’ and customers’ reactions to and level of engagement with our initiatives. Failure to execute these initiatives or provide our members with positive experiences may result in a loss of active members, failure to attract new members and lower than anticipated sales. There is no assurance that our initiatives and strategies will improve our operating results.”
If the business environment isn’t hostile enough for Sears, BusinessInsider.com recently noted what might be described as “adding insult to injury.” In an article titled, Sears has a bigger problem than plunging sales… Hayley Peterson observes:
“Companies that supply Sears with the TVs, toys, and clothing for sale in its stores are growing increasingly concerned about the retailer’s ability to pay its bills, and some are cutting back on shipments to stores as a result. That means Sears and Kmart stores are receiving less merchandise to sell, which is a grave problem for a company that’s trying to avoid a possible bankruptcy by reversing years of sales declines.”
So while the trend toward online is OBVIOUS, there are some SUBTLE signs that suggest that well-positioned retail stores will not go the way of the dinosaur or the dodo bird. One such subtle indicator comes from the most unlikely place – “retail slayer” Amazon!
If you were to take the market value of Sears and add it to the value of Macy’s, plus Kohl’s, plus JCPenney, plus Best Buy, plus Nordstrom, plus Dillard’s, plus Barnes & Noble, plus Target, and plus Gap, you would hit a valuation just under $95 billion. That cumulative total would be about ¼ of Amazon’s market value which is in excess of $370 billion. You are probably saying that is one more proof point for the obvious trend, now where is the subtlety?
Here it is – Amazon is tactically opening brick and mortar stores – be it Amazon Books (now in California, Illinois, Massachusetts, New York and Oregon) or other retail concepts like Amazon Go (1,800 square feet of retail space showcasing breakthrough “Grab & Go” technology). These physical store openings hint that the sky is not falling on all retail.
In truth, there is a contraction for retailers who thought they could simply warehouse products for consumers – given that those same products can now be purchased with ease and convenience online. At the same time, powerful online brands like Amazon realize there will always be a need for humans to have a “place to go” where they can delight in sensory experiences like thumbing through books, sampling food items, trying on clothing, and feeling the cool, smooth metal of a bracelet as it is placed on your wrist by a caring & knowledgeable sales associate.
Like most choices in business and in life, sales decisions for the future won’t be whether to engage customers online vs. offline. Those choices will involve how much to engage them in each and how to create a differentiated and craveable offline experience that supports and enhances your online product or service delivery.
Solving for those challenges will require an eye for both the OBVIOUS and the SUBTLE!