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Just How Many Stores Must Retailers Close to Beat Amazon?

23 September 2016

From The Motley Fool:

Are there enough stores for retailers to close to offset the impact of Amazon.com?

Macy’s announced last month it identified 100 stores it will close in a bid to offset six straight quarters of declining comparable store sales. The reduction equates to 12% of its store base and exceeds the combined number of store closings the retailer has initiated over the last six years.

Where some companies like Sears Holdings probably don’t even have enough stores in its portfolio to close to offset the damage being done, others don’t seem to fully appreciate the threat they face and aren’t doing enough to sufficiently offset the Amazon effect.

. . . .

Retail remains “overstored” with too many locations that can’t support declining customer traffic. According to data compiled by the industry watchers at ShopperTrak, retail store foot traffic has plunged 57% between 2010 and 2015, and shoppers are checking their mobile devices before making a purchase.

Some in the industry seemingly don’t want to accept the notion that many of their stores aren’t needed. Instead of closing locations, they’re just reducing their size.

. . . .

But there is a dramatic reduction coming in the number of stores that will be open.

  • Office Depot has closed 400 stores as of the end of its second quarter and will be closing 300 more over the next three years.
  • American Eagle Outfitters will close 154 stores through 2017.
  • Barnes & Noble is closing 10 stores this year and 223 stores by 2024.
  • Chico’s FAS will close 120 stores thru 2017.
  • Children’s Place will close 200 stores by 2017.
  • Gap is closing 35 stores this year.

. . . .

Malls are not the draw they once were and department stores have lost their ability to attract customers. Real estate research firm CoStar reports annual department store retail sales have tumbled 28% since their peak in 1999, and revenues have slid every single year except one to end 2015 at $165.5 billion.

All the while Amazon.com is getting stronger, recently reporting its third consecutive quarter of record profits by generating $857 million in earnings on sales of $30.4 billion.

Link to the rest at The Motley Fool

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51 Comments to “Just How Many Stores Must Retailers Close to Beat Amazon?”

  1. “Just How Many Stores Must Retailers Close to Beat Amazon?”

    Title be a question, the answer is closing stores won’t help them beat Amazon.

    Closing stores only means they will no longer support that area and — you guessed it — closing stores will drive even more sales to Amazon!

    If they want a chunk of those Amazon sales they’re going to have to be as good/easy/quick as Amazon (oh, and as customer friendly too!)

    • Exactly, Allen.

      I don’t really have much sympathy for these stores (though I do for any displaced worker). The world CHANGES. Changes enabled them to be dominant at one time, because the small mom and pop competitors couldn’t adapt to the market desires at that point. Now more changes are taking away the dominance these guys have, because they have failed to see and adapt to new market desires.

      Bummer for them. Amazon terrifies me at one level, but even so I get packages from them a couple of times a week. Why? Because they meet my shopping needs!

    • “Customer friendly too!”

      That’s really the key for me. Years ago I noticed you couldn’t find a salesperson (it was Macy’s I was in at the time) on the floor to answer questions or check stock or help in any way. “Booksellers” at Barnes and Noble could no longer recommend books I liked. Clothing stores never stocked a size that fit me properly or discontinued a favorite item.

      So, if I’m going to do it all myself, why not shop at Amazon, which generally has what I want at a good price? Oh, and if there’s a problem, their customer service is awesome.

  2. @ Allen F

    “Title be a question, the answer is closing stores won’t help them beat Amazon.”

    Well, sure it will*! If ALL the stores are closed, no rents or property taxes, no employee labor costs, no inventory costs. Pure 100% profits all the way!

    Oh, wait… Scratch the profits thingie. All that money can go to Golden Parachute exit boni for the C-Suiters. (And too bad about the stockholders and investors.) 🙂

    *Beat Amazon in the race to the bottom.

    • I live in a part of Cali that used to be served by a nice little clothing chain called Mervyns. For a long time it was a well run family owned business that sold good stuff for fair prices. At some point it was bought out, and after that it was passed around like a sorority girl at a frat party until finally it collapsed under the weight of parachute-induced debt that had been larded onto it. It is no more, and even sadder for the dedicated employees that had been part of the ‘family’ for decades.

    • @James– Yep. Businesses don’t seem to care about their business anymore. Lay off people, cut stock, force remaining employees to make impossible quotas (see Wells Fargo). So long as those executives are getting their million $$ compensation packages, everything is just dandy. If I ran my business this way, I wouldn’t HAVE a business.

      • Is it executive compensation or online competition that is the major challenge to these companies?

        Anyone remember when AIG failed? They had 79 trillion in notional cascading swaps outstanding, and the news folks were standing in front of the building complaining about what the CEO got paid.

  3. People are choosing to shop online. No one is forcing them. Consumer choice and all. It’s better to shop at Amazon for me. I can get stuff from them that I can’t get in my city. I am a Prime customer and that means that for certain products, I get that thing in two days.

    People used to weave their own cloth from wool they sheared off their own sheep. Then, they sewed their own clothes.

    Today, we pay merchants to make those clothes for us and we purchase them online and get delivery in two days.

    Them’s the breaks for the retail stores but I’m sure we human beings are all happy that we don’t have to live in the country surrounded by sheep we have to shear, wool we have to spin, cloth we have to weave, and material we have to cut and sew into clothes so we can put on a pair of pants and a shirt.

    That’s a whole lot of labour and skill that I don’t posses nor do I want to spend that much time in order to be able to wear clothes. Plus there are a whole lot more people involved in the new division of labour who are earning wages and salaries raising farm animals, processing raw materials, designing and making clothes for the masses.

    Industrialization was a great development. It’s not done yet. Shopping online is just the latest development.

    One day, we’ll have cornucopia devices in our homes that take in raw material and put out all the things we need — food, clothing, housewares, etc. Then, even Amazon will be out out of business except as a supplier of raw material for the devices.

    The times they are a ‘changin.

  4. “Malls are not the draw they once were and department stores have lost their ability to attract customers.”

    LOL. Yes, indeedy! Where I live in the South Bay part of LA, Del Amo Mall in Torrance is completing a $300M add-on/renovation. The owners (Westfield or Simon — I forget which) want to re-create Rodeo Drive. The new section is utra high-end la-de-da shops with sky-high prices. E.g. “The Flip Flop Shop” where one can purchase $100 flip flops (no kidding!). Meanwhile, I notice a LOT of now-empty spaces in the mall, and there seem to be more of them every month.

    Right now there’s a lot of foot traffic in the new part of the mall, and not so much in the old part. But I’m sceptical how this will work out in the long run.

    • ETA: And the 4 mall anchor stores are Sears, Penney’s, Macy’s (all in trouble) and Nordstrom (very expensive).

    • I haven’t been to our mall in so long my 13 year old daughter actually didn’t know what the mall was. lol I don’t really feel any need to introduce her to it. We do most of our shopping online. She knows you can find just about anything on Amazon.

      • LOL. Maybe your 13-year-old is jiving you about not knowing about malls!

        When school lets out here for the summer, the local malls get filled with Teen Mall-Rats hanging out ALL day.

        When I was a teenager, we hung out at the local drive-in like they did in American Grafitti.

        Of course, I was a teenager back in the Sixties, and that film was an accurate description of teen life in them thar days. 🙂

  5. My husband bought cologne from Macy’s online. They charged him double for it and then proceeded to hassle him about their mistake.

    Then he found out it’s cheaper on Amazon.

    Businesses shoot themselves in the foot and are quick to blame Amazon.

    • Similar thing happened to me, Diana, but take out Macy’s and insert Sperry. Shoes bought at mall by my children as a gift, wrong size, didn’t return ’em in time, got nasty-talked by a manager who couldn’t be bothered. Never went back. Bought my next pair of Sperrys through ‘Zon.

    • Be careful of buying name perfumes on Amazon. They do have some fakes, just like ebay. If the price is VERY low, it might be a dupe.

      That said, I hate going to the mall. I try to avoid it. I haven’t been there in a couple years (bought pans at Macy’s cause big sale and sister wanted to go and had coupons she shared with me, so DEAL).

      I really hate parking lots and crowded malls and rude or oblivious salespersons. IF shopping were a wonderful experience, I’d reconsider. It’s just not…for me.

      I remember back when Macy’s had real sales assistants. They remembered what you liked, your style, they’d call if there was a very good sale on the brands/styles my husband favored. It was always the same more mature sales assistant whose job dedication and skills were from another era. That made you want to go, cause “Alden” knew what you liked and when prices were good. He knew the merchandise cold–even what was coming soon to recommend.

      Last time I went to Macy’s, the sales assistants didn’t have a clue about their merchandise and were really not friendly or helpful. I had to wander about looking for the particular item I wanted and then watched the sales clerks chat up with each other while the line to pay got longer and longer. It was a bad experience. It made me decide I didn’t need Macy’s store. If I wanted a Macy’s item, I’d wait for a sale and order online. My last 4 orders from Macy’s were online ones.

      Crappy sales assistants and high prices don’t make me wanna go to your stores, Corporations. They make me wanna stay home.

  6. We have two large malls in the central city — Hillside and Mayfair — and a galleria style mall in the centre of downtown. Another downtown mall closed in the 80s and is now offices. Hillside and Mayfair have both been around as long as I can remember, at least 40 years, and have grown over the years.

    Sears (Canada) has been an anchor tenant of Hillside from day one. 20 years or so ago they added a second floor. There used to be a seasonal department on the main floor. That’s been moved to the parking lot and the space taken over by women’s clothing. There used to be a book department and a toy department. Both closed and the space taken over by women’s clothing. The luggage department has been moved to the second floor and the space taken over by women’s clothing. The children’s clothing department has been moved to the second floor and the space taken over by women’s clothing. The main floor is now 1/6th men’s clothing, 1/6th perfume and cosmetics, and 2/3rds women’s clothing. Everything else — appliances, tools, housewares, children’s clothing, linens, sports and exercise equipment — is on the second floor. They even closed the furniture store at a different location and moved it to the second floor.

    Hillside finished a major renovation and expansion about two years ago that increased the shop space by about a third. The expansion remains empty except for the two anchor tenants that signed on before construction began, a drug store that relocated from elsewhere in the mall, a couple of cell phone kiosks, a popcorn stand, and an insurance broker. There are several new vacancies in the older section of the mall as well.

    Mayfair has just broken ground on a major expansion that will also increase their shop space by about a third. There are empty storefronts across the street from them in three directions. The fourth direction is housing.

    These people are nuts.

  7. The idea that retailers cannot imagine why i would rather order sneakers from my desk than fight through hordes of abandoned teenagers at the mall after fighting bumper to bumper traffic to get there and pay 50% at a Foot Locker store staffed by a bunch of folks who look like they’d rather be home playing video games sure is a tough one.

    In my old corporate career, I often argued with people that putting crap on a shelf and hanging a sign out that you are open is not a business plan. Any idiot can do that.

    You actually have to convince people to come in, show them something they find interesting and worthwhile, ask a price they are willing to pay and recognize as fair and then make them feel like you appreciated their business and convince them to come again.

    Fail at any point in that chain and one of your competitors will swoop in and eat your lunch.

    Right now Amazon is attractive, diversified, cheap, easy to shop and great on customer service. Fail to match them on nay point and you lose. Unless you can offer something they can’t that is so awesome it makes people forgive the fact that you are kore expensive or more of a hassle or whatever, forget it.

    Somehow I don’t see Sears or Barnes and Noble suddenly changing course and innovating in some way that takes a bite out of Zon.

    • The idea that retailers cannot imagine why i would rather order sneakers from my desk than fight through hordes of abandoned teenagers at the mall after fighting bumper to bumper traffic to get there and pay 50% at a Foot Locker store staffed by a bunch of folks who look like they’d rather be home playing video games sure is a tough one.

      Sure it’s a tough one. Retailers are just as capable of imaging that as authors are.

  8. It’s a staight value proposition thing.
    To survive in the age on online shopping B&M stores have to offer comparable value to the online retailers. That value can come from service, price, accessibility, timeliness, inventory breadth or uniqueness, or some combination of the above.

    You *can* beat online.
    But to beat online you have to do better than just show up and expect consumers to swarm you. This is particularly true in books (and many other dry goods categories) that still think that stocking the product is all the draw they need. That works for Ferrari, Porsche, high end audio, and Swarotski and other luxury products with limited distribution channels but for broadly available products “stock it and they will come” only works if you are everywhere. And even then you need other differentiators.

    All those retailers need to start by asking themselves why should *anybody* bother to show up. What incentive can they offer consumers to leave their comfy couch to go visit their store instead of just ordering online.

    Because triageing stores is just putting off the inevitable.

    • Martin L. Shoemaker

      Service? Maybe. At some local stores, I get great service. Others…

      Price? Almost never better than Amazon.

      Accessibility? Nothing is more accessible than my phone.

      Timeliness? There’s an advantage for them. When I want it NOW, I shop local. But if they don’t have it and promise they can order it, can they get it to me in two days or less? Amazon can, and it won’t cost me a penny.

      Inventory breadth or uniqueness? Hah! I used to wander and browse book and video stores, back when that was the only way to shop. It was as good as I could do. Now, I can’t count the number of times I’ve gone in, found something that I liked, and said, “Oh, wait, this is #3 in a series. Do they have #1 and #2? No? Then I guess I’ll have to order those from Amazon. And as long as I’m waiting for those, there’s no rush on #3.” And I put it back and order all three from Amazon.

      They’re not looking good by these criteria.

      • It’s always a bit funny when they offer to order something for you. Like they think the internet is a secret thing only companies have access to.

        The major advantage of stores is that I can get something right now, and I can make sure that the individual item is in good shape. Sometimes I see my local bookstore has brand new books that are all crunched up from bad shelving. I don’t know who’s going to pay full price for a book that’s been mangled. If I order a book from Amazon and it comes that way, I just send it back and get a new one (and don’t have to pay anything extra to do so).

      • Service? Better trained employees would help.
        Price? Improved supply chain management can get them close enough.
        Accesibility? Nobody says they can’t run an online operation and do ship to store.
        Timeliness? That should be their trump card yet few companies play it. Circuit City played it well but only after it was too late. They had an online “pick it up in 20 min and if it’s not ready you got 10% off” deal. I bought a laptop that way. The price wasn’t lower but it was close enough. I drove 15 minutes and it was ready. It beat having to drive to the UPS depot for a pickup there.

        It’s worth remembering not everybody is home when UPS/USPS deliver or live in a place where the package can be left at the doorstep. That’s why Amazon does lockers. Ship to store is something to build on.

        It *is* possible to compete with online.
        But not if you’re unwilling to change your business model.

  9. That’s funny. Costco has added thirty locations in the US and abroad. Perhaps the answer isn’t closing stores, but adapting to the changing market. I can walk into any store, snap a pic of the UPS and find a better price on Amazon.

    Any store but Costco. I have yet to beat their price on Amazon. Perhaps, business should try reinventing themselves in this new economy, rather than cry about how things aren’t the way they were.

    • Bezos studied Costco very carefully. Costco concentrated on customer loyalty and low prices. Bezos followed that lead.

      Note they both have paid membership. Costco charges everyone a membership. Amazon offers Prime. Yes, they are not identical, but both offer real benefit from membership.

  10. The Mall & Big Box store era has had it’s run.

    They closed down the mom & pop shops, moved business district off Main Street and disrupted the economies of small towns all over America.

    My old home town is an example of “We’ll open a mall at the edge of town and everyone will work there! We’re SAVED!” Only the stores in the mall didn’t last, the mall dried up, the jobs dried up and nobody has any money to spent for overpriced goods.

    This was exactly what economists were shrieking about in the 1970’s when the manufacturing jobs went overseas. You can only have a ‘service’ economy for a limited amount of time before the ‘low wage’ spiral takes it all down the drain.

    It isn’t Amazon that’s closing these stores, “it’s the economy, stupid.”

    • “It isn’t Amazon that’s closing these stores, “it’s the economy, stupid.””

      I’m sure Amazon has something to do with it, but I agree, the biggest problem is likely to be that too few people have the money to shop any more, or would prefer to buy something for 20% less online and have it delivered next week than to buy it at a store and get it today.

      I mean, those kids graduating with a useless degree, six-figure student debt and a job flipping coffee at Timbucks aren’t going to be buying much, online or elsewhere.

      And their older brothers and sisters aren’t much better off now they have a huge mortgage to pay.

      Personally, I find myself using Amazon less and less. I mostly buy music and movies from iTunes, rather than physical CDs or DVDs, and the last time I ordered something from Amazon they annoyed the heck out of me by continually trying to force me to take a trial Prime subscription during the checkout process (‘yes, you selected standard free shipping on the previous page, but that doesn’t mean we can’t reset it to trial Prime subscription on this one!’).

    • Yes, exactly. Corporate America has been cutting its own throat with its obsession on quarterly profits at the expense of all else. I was reading about this very issue in the Harvard Business Review clear back in the middle ’80s and look, all those chickens have come home to roost.

      Better trained employees? You gotta pay ’em. You’re not gonna get ’em for minimum wage. If I’m not going to get help and support at the store, I’m not losing anything by shopping online– in fact, customer reviews are an advantage. And then, as you mention, you get in this death spiral. If people aren’t making decent wages, how are they going to buy things? You can’t keep an economy afloat on the 1%.

      Now there’s this trend to foist more and more business expenses onto the customer. My husband went into a Lowes today and found NO cashiers open– if you wanted to buy something, you had to use the self-check. Heaven forbid you should have a big order or items without a SKU. The reason for this? They’re slow, so they laid off a whole bunch of people. Since they aren’t willing to staff the checkout registers, I guess they don’t want customers to buy things in their store.

      • Yes, exactly. Corporate America has been cutting its own throat with its obsession on quarterly profits at the expense of all else.

        Quarterlies?

        It takes Ford about ten years to develop a car.

        Oil companies start exploration and development drilling five years before production starts.

        Publishers sign a contract for books they will sell in two years.

        Banks issue thirty year mortgages.

        It takes between six months and four years for Walmart to even get all the permits for a new store.

        Trump announced the Chicago Tower project in 2001 and didn’t sell all the units until 2014.

  11. You go into a store looking for something in particular but you can’t find it in your size. You ask the bored clerk (if you can find one) “Do you have any more in the back?” “Everything we have is out there.”

    At Amazon, they have it in the back.

    • At Amazon, they have it out in front. There is no ‘back’.

    • Exactly why I buy shoes at Amazon and Zappos. Macy’s is closing? Screw ’em, they never had my size in stock. Let the space go to a store that actually wants customers.

      • I almost never buy shoes online because sizing is so inconsistent. Same with most types of clothes. Fortunately, I’m not a big fashion person, so I don’t buy clothes very often. (Part of the reason for that is that finding clothes/shoes that I like the fit, price, and look of is such a frustrating process. Off the rack just isn’t fun for me–and I’m not a particularly odd-shaped person, so I don’t know how other people manage it.)

        • Amazon. Free returns.

          I buy most of my clothes and shoes at Amazon. I can try them on at home, at my leisure, not some hot and who-knows-if-there-are-voyeurs changing room.

          The best time to try on shoes is late in teh day when feet have “swollen.” But that’s when you’re tired. Ordering them online means I try them in the AM, then the PM, and see if they fit fine for real. 😀

          Once you know your size in a particular brand, you can order online with some good confidence. I’ve had very little trouble as long as I stick with the brands whose sizing is familiar to me, some running larger, some smaller, some wider, some narrower.

          But when you have a free returns, no-hassle policy like Zappos and Amazon, there’s no risk.

          And I am not easy to fit. I’m a size 10 shoe (sometimes need wide, depending on the style/brand) and I have G cup boobies. So, unless a dress has some give or the designer is good with generous-bodices, it’s a problem. The top will be tight when the bottom fits. And I don’t like two-pieces. I like dresses or tunics and leggings or yoga pants. But you learn which designers work with you. Some obviously skew small-bosomed. I don’t go there. (Yes, you Calvin Klein and Elie Tahari.)

          One benefit of online is you can get custom-made dresses without custom-made prices (if a tailor were to make your dress to order). For example, eShakti in India lets you send them your specific measurements, and you can get a dress for under 100 bucks (in some cases, if you get coupons or something, less than 70). How many tailors will make a custom dress for less than 100 bucks?

  12. I don’t know why this is framed as an Amazon issue when its simply online vs physical stores. I bought 100% of my kids clothes from Children’s Place last year, just not in a physical store.

    • That’s a great point.

      Why blame Amazon when they are filling a need in markets way too big to be ‘niche’?

      Z-World clothing is going to want to stock the lowest number of ‘Z’ merch. Hard to fit? So sorry!

      Back when store owners knew their customers, they could buy merch sized to fit their ‘regular customers’

  13. I had been putting off buying new belts and filters for my vacuum cleaner for literally years. The prospect of standing in the store trying to find the right parts for my model just made me go “DO NOT WANT!” Then I realized, hey, you can get everything else on Amazon (my daughter-in-law bought her wedding dress there, they have cat litter new *and* used (?!?), and the other day someone in a promotions group I’m in reported that someone bought a *sword* through her affiliate link), so why not vacuum belts and filters? So I went to Amazon, typed in my model name and number and the parts number, and voila, up came the right parts, at a good price with free 2-day Prime shipping! My new belts and filters will arrive today, and then I can give my sorely neglected vacuum cleaner its new makeover, courtesy of Amazon, with no driving around and frustration.

    • I bought sewing machine parts the other day.

    • Yep. I have a Bissell (hated my previous, pricier Dyson one) and you can order the replacements from Bissell online or Amazon online (though you have to know the parts and read the reviews to make sure it’s not bogus.)

    • I don’t remember whether it was the furnace filters or the water filter for my refrigerator which led to this revelation. Both of those used to require trips to Home Depot, where I’d wander around what seemed like acres looking for them (I never remembered where they were stocked because I bought them so infrequently). So much easier to order from my desk at home!

  14. Related question: Just how many of my legs must I cut off to beat Usain Bolt? ’Cos you know, if I weighed less I could run faster.…

  15. Yeah, it’s not really Amazon, it’s the online experience in general. Case in Point: we needed a new well pump, as our old one gave up the ghost after about 13 years. Cost to get a new one locally was $300 minimum plus the install (because no one would sell us just the pump), for a total of $1500 or more labor.

    Well, that was far, far more than we could pay, so I did some research online. Prices about the same, but then try to find someone to install it, when we didn’t buy it from them. Egad. Finally found a 1HP, 100 volt pump for $100. Now we were talking! Free shipping, got it in a few days, and my brother and middle son pulled the pump (by the way, it’s not that hard). We had water by the end of the day.

    We buy most of our car parts online. Far cheaper (a fuel pump for younger son’s SUV? $90 in stores, 10 bucks with free shipping on Amazon) and even waiting for it to arrive isn’t that bad any more. Most things come in one or two days, less than a week at worse.

    Clothes in stores are ugly, cheaply made, and not appropriate for a nearly 60-year-old fat woman. Shoes are so horrible, I hate to even look. Four and five inch heels aren’t going to work for me. I find better-made clothes that look nicer, and shoes with low soles for next to nothing, I’m happier and I’m helping poor/handicapped people or local school systems and myself.

    It’s like with book sellers, if they want to compete with Amazon they need to come into the 21st century and learn how people shop. Frankly, I foresee a time when big store chains are dead and smaller, quicker stores are around. Maybe not mom and pop stores, but they could come back, if they can adapt to the new reality.

  16. Buying shoes? I order a 14 and a 15 and return the one that doesn’t fit. Same with shirts etc. My Samsung TV s sound bar’s remote needed a new (round) battery. Go out and drive from store to store? Nope. Amazon had the exact number, got it the next day. And on and on. Haven’t been in a mall for years. I don’t care if they all close. Go into the mall store and they offer to “order” it for me. That means another trip back to the store when it comes in. Duh.

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