Customers are shifting away from big-box stores and malls to the comfort of e-commerce and online shopping. Best Buy has tried to combat this trend by overhauling its stores and inviting customers to actually “showroom.” Despite companies like Best Buy’s best efforts, visits to store locations are dropping. Traffic to U.S. retailers declined during the recession, and the fear is that five years later, these customers are still not coming back. During the 2013 holiday season, retailers only received about half of the traffic that they did just three years earlier. ShopperTrak tracked declines from 28.2% in 2011, 16.3% in 2012, and 14.6% in 2013.
Online sales, however, have increased twice as fast as brick-and-mortar store sales. Retail analysts suggest that browsing is done more online as well. Customers will browse items online then make specific, targeted trips to stores to purchase an item. According to ShopperTrak, in 2007 shoppers would visit an average of five stores during a mall trip. Today, that number is reduced to three. Today’s customers are time-starved and view shopping at the mall as a “waste of time.” And if they do shop at the mall, they have usually done product research online beforehand.
During the third quarter of 2013, online sales account for 5.9% of overall retail, but the impact on how shoppers use stores is much greater. The decline in shopper traffic is motivating some retailers to make dramatic changes. Express Inc. aggressively slashed prices during the holidays, even though its profit margins were heavily eroded. Home Depot is cutting back on new store openings in order to invest more heavily in online operations. Gap Inc. and Sears Inc. have both closed hundreds of stores over the past few years. JC Penney has announced that it will close 33 underperforming stores and layoff 2,000 positions. Macy’s recently announced that it will close five stores and lay off 2,500 employees. However, Macy’s is converting over 400 of its stores to also serve as fulfillment centers for online orders. Best Buy is also expanding its ship from store program.
In 2006, 325 million square feet of new retail space was opened. In 2013, only 54 million square feet was opened.
Discussion Questions:
1. What are the trends in online shopping vis a vie traditional stores?
2. Do you expect these trends to continue? Why or why not?
Sources: Shelly Banjo and Drew Fitzgerald, Wall Street Journal, January 16, 2014; Creatas Images / JupiterImages