By Tricia Drevets
Despite robust predictions for the 2016 holiday shopping season, traditional department stores are continuing their death spiral in the U.S.
Last week, Macy’s announced the closing of 68 stores – three have already closed; 63 will close this spring; and two will close by summer. Additionally, Macy’s plans to close another 30 locations over the next few years.
The same week, Kohl’s told investors that store sales were down 2.1 percent this past holiday season over same period in 2015.
Sears also announced that it would shutter 78 more of its troubled Kmart stores as well as 26 of its flagship locations in 2017. The same day, the company made public the sale of its Craftsman line of tools and machines to Black & Decker for $900 million.
Understandably, stock prices of all three retailers have plunged, and competitors like J.C. Penney and Nordstrom are feeling the heat as well.
Although these announcements are disturbing, they should not be surprising. In fact, what is more surprising is that these traditional retailers have held on as long as they have. With the exception of certain high-end and low-end stores, today’s consumers have been moving more and more away from brick and mortar stores for many years now.
Why? Consumers are comfortable with shopping for and purchasing just about everything online. They expect the myriad of choices, the deep discounts and the quick service that comes with internet shopping. American consumers spent $91.7 billion online during November and December, an increase of 11 percent over the previous holiday season.
Sales transactions on mobile devices increased a whopping 33 percent over last year to $1.2 billion just on Black Friday alone.
As expected, Amazon dominated holiday sales with almost 40 percent of all online purchases going to the mega-e-retailer during certain parts of the holiday sales season.
Even last minute sales, which once helped boost brick and mortar store coffers, went to online stores. The National Retail Federation (NRF) reports that 52 percent of surveyed shoppers made last-minute holiday purchases online. That NRF survey revealed that 42 percent of shoppers visited department stores and 27 percent visited discount stores for last-minute gifts.
In a January 4 press release, Macy’s said it will use the estimated $550 million in savings generated by its store closures to invest in its digital businesses, including Bluemercury, Macy’s Backstage and China.
“While we are pleased with the strong performance of our highly developed online business, as well as the progress we have made on selling and visual presentation programs and expense reduction initiatives in 2016, we continue to experience declining traffic in our stores where the majority of our business is still transacted,” said Macy’s CEO Terry J. Lundgren in the press release.
“Our omni-channel strategies continue to evolve based on the changes in our customers' shopping behaviors, including a focus on buy online, pickup in store and mobile-enabled shopping.”
So what is next for brick and mortar department stores? Can they retool and survive? The answer is not without some big changes.
Savvy consumers want more than what they settled for in the past. The more can be in deep discounts -- Low-priced chains such as T.J. Maxx and Marshalls reported strong holiday sales.
The more can also be with highly customized service.
Melissa Gonzalez, author of The Pop-Up Paradigm, said that the physical stores that succeed will create “connected” stores that use data to offer a detailed and personalized understanding of customers’ likes and dislikes.
In an interview on Shopify Inc., Retail Minded’s Nicole Leinbach Reyhle, said, “While data has become more accessible for smaller merchants to utilize and apply to their business strategies over the past few years, thanks to various CRM and POS systems, 2017 will introduce businesses of all sizes to even more accessibility to data that will help them strengthen their business success.
“Specifically, I believe that cognitive commerce will become more prominent among businesses to incorporate into their business strategies. This will help them in shaping future consumer conversations, enhancing existing product sell-through, understanding customer personalization better and more. Cognitive conversations lead to cognitive commerce — and that's something any merchant can appreciate.”
The new year will likely see an increase in niche retailers for new and existing brands.
Using technology and social media, traditional stores need to create “shop-within-a-shop” opportunities to target these niche markets, according to Courtney Albert of the Parker Avery Group.
However you look at, e-commerce is only strengthening, so 2017 is poised to be a make or break year when it comes to brick and mortar retail stores in general and department stores in particular.