By Tom Popomaronis. Source: Forbes.
E-commerce has been expanding for more than a decade, thanks largely to product accessibility and availability through use smartphones and other devices. Traditional retailers aren’t faring well in this environment—and 2017 will be a deciding year for many department stores and apparel chains, with even major chains needing to step up their game. Many of these companies place blame for retailers’ struggles on Amazon, but that might not represent the entirety of what companies are dealing with.
Reason for concern
Phil Wahba of Fortune asserts that retailers have been struggling to keep their heads above water through the entire 2016 year, with companies such as Target, Kohl’s, J.C. Penney, Neiman Marcus and Macy’s all losing market share or having the breaks put on comebacks. And during the holidays, online appeared to be carrying a club rather than a stick, with sales growing by 14%from the 2015 season—in-store sales grew just 1.4%. In this context, based on an analysis of 32 publicly held companies that break out e-commerce sales quarterly, Amazon was the clear winner, driving a whopping 82% of growth in Q3 2016. The company also is thought to have accounted for over half (54%) of the quarter’s online sales reported by the U.S. Commerce Department. These types of statistics have poured fuel on the idea that Amazon has become an industry Goliath that does more harm than good to the traditional retail sector.
But not everyone agrees that Amazon is the bully on the market block
Retail expert and FORBES contributor Steven Dennis asserts that department stores have been on the decline for more than two decades, long before Amazon was able to assert itself as a legitimate competitor. He further contends that the shift from department stores to off-price retailers and dollar stores has been punishing, and that department stores haven’t been able to embrace digital or more generally transform themselves or in ways that meet consumers’ needs.
Additionally, reports that some industry insiders, such as Wes McDonald, former CFO of Kohl’s, noted consumer behavior changes. More specifically, shoppers are putting their money into services or experiences like trips, rather than buying physical stuff. They also are trying to put their hard-earned dollars into investments, such as home improvement, that they see as more prudent. There has also been speculation that the entire retail pie might be shrinkingdue to economic factors like tighter credit conditions and housing expenses.
Justin Lahart further points toward that the prices for many retail items are rising more slowly than overall prices, making it difficult for companies to generate gains even if sales volume is high.
As retailers and online stores continue to battle it out, consumers likely will see retailers coming up with new models and strategies that benefit buyers overall. TJX, for example, emphasizes a more constant flow of new goods, which is allowing it to survive when other stores are having trouble responding to trends. They’ll still be able to hit stores where experience, service or transport are critical, but e-commerce is for good, and it won’t just be Amazon at the finish line.