In trying to explain dismal earnings reports from Macy's, Nordstrom, and other traditional retailers, it would be easy to fall back on the trope that brick-and-mortar retail is dying and only e-commerce can save it from extinction. Results due this week from mass discounters such as Walmart and Target will likely reinforce the point.
After all, a cursory glance at a stock chart comparing Amazon with other retail giants seems to tell you everything you need to know about who is winning the fight for shopper dollars.
But a deeper look at e-commerce sales trends tells a different story. It suggests online shopping isn't yet the saving grace retailers had hoped for when they began plunging billions of dollars into new websites to lure shoppers accustomed to ordering everything from books to dog food at the click of a mouse or touch of a screen.
In fact, e-commerce sales growth at companies like Walmart, Nordstrom, Gap, and JC Penney has actually been slowing, even as the companies sink more money into boosting online sales.
Nordstrom, an early adopter of online shopping, took a surprise earnings hit this past quarter due to unplanned discounts taken in response to declining shopper traffic -- in store and online. Macy's felt a similar traffic slowdown: Its number of transactions, including store and online sales, fell 3.6 percent in the latest quarter from the year before.
Total U.S. e-commerce sales still outpace those at brick-and-mortar locations, growing 14.1 percent in the latest quarter from the year before, compared to 3.7 percent growth for total retail sales, according to the Census Bureau.
But strip out sales that occur on Amazon.com -- items sold by Amazon itself, as well as those sold by third parties -- and the picture changes drastically: Non-Amazon e-commerce sales grew just 4.5 percent in the second quarter from the year before, down from 10.5 percent growth in the second quarter of 2011, according to an analysis by Aram Rubinson of Wolfe Research.
Americans have more money in their wallets these days as wages grow, gas prices fall and inflation remains stagnant. But the share of their income available for retail spending is steadily dwindling, with a smaller percentage of discretionary dollars going to, say, clothing and food and a bigger percentage going to healthcare, education and the like.
And sluggish growth at established stores suggests that retailers aren't actually finding new customers when they put up shiny new websites and spend billions of dollars on engineers, warehouses and shipping. Instead, online sales seem to be taking dollars that would have been spent in stores anyway -- particularly for larger chains, where more shoppers already have easy access to the merchandises.
Of course, these companies have little choice: They need to sell things where their customers are shopping. As consumers migrate online, retailers must cannibalize their in-store sales or let others (read: Amazon) do it for them.
That mentality can be seen in Walmart's decision this holiday season to offer the same Black Friday discounts to customers online that have historically been limited to its stores. Walmart is mounting a respectable fight against Amazon, but training its customers to stay away from its stores will come at a cost.
Shopper traffic at brick and mortar retailers hasn't posted positive growth since the first quarter of 2012. As retailers make it more attractive to shop online, the decline in store shoppers will continue its free fall.
So what can retailers do? Rubinson suggests taking a lesson from Netflix. Once just a run-of-the-mill provider of streaming video, Netflix realized the best way to hook consumers is to offer original content they can't find anywhere else. JC Penney's new CEO is trying something like this by paying attention to more exclusive, private-label products and rolling out 850 hair salons co-branded with InStyle magazine. H&M and Target have used limited-time partnerships with high-end designers to drive shopper interest.
Either way, retailers have to give shoppers a compelling reason to visit their stores by figuring out their own version of Orange Is The New Black. Because a new website or mobile app just isn't going to cut it.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
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