Will online sales redeem struggling brick and mortar retailers?
More consumers than ever before went online to purchase gifts this holiday season. While Amazon.com was the clear winner of Christmas, according to reports, plenty of brick and mortar retailers also saw e-commerce activity pick up. Unfortunately for some, including J.C. Penney, Macy’s and Target, increases in online sales were not enough to offset declines in physical store operations.
While not giving an exact percentage increase for the holiday season, J.C. Penney chairman and CEO Marvin Ellison said the company is “encouraged by a very strong performance in our e-commerce business, evidenced by double-digit growth.” The chain saw its comparable store sales decline 0.8 percent during November and December.
Macy’s, Inc. reported the company’s websites — macys.com and bloomingdales.com — each posted double-digit gains for the last two months of 2016 while comparable store sales fell 2.1 percent during the same period. Macy’s CEO Terry Lundgren, who will step down from the position this year, said the gains made online were not sufficient to make up for declines in store traffic “where the majority of our business is still transacted.”
Target reported its online sales improved 30 percent year-over-year over the final two months of the year, but again the gain was not great enough to push the chain’s sales into positive territory. Brian Cornell, chairman and CEO of Target, said the increase in online sales also hit the company in its bottom line profitability.
“While we significantly outpaced the industry’s digital performance, the costs associated with the accelerated mix shift between our stores and digital channels and a highly promotional competitive environment had a negative impact on our fourth quarter margins and earnings per share,” said Mr. Cornell.
- JCPenney Reports Holiday Sales Update – J.C. Penney Company, Inc.
- Macy’s, Inc. Reports November/December Sales and Revises 2016 Guidance – Macy’s, Inc.
- Target Reports November/December Sales and Updates Fourth Quarter 2016 Guidance – Target Corporation
DISCUSSION QUESTIONS: Do you think brick and mortar retailers such as J.C. Penney, Macy’s and Target can build their online businesses to a point where they offset declines in store traffic and sales? How can these businesses address the hit they will take to profitability as more dollar sales shift online?