From Seeking Alpha:
The tremendous ructions occurring in the retail industry continue and are gaining momentum at a tremendous pace as Amazon and the rapid growth of e-commerce progresses. Already the number of bankruptcies in the retail industry for 2017 thus far have exceeded all of 2016 and there are signs of more to come.
Indeed, even retailers typically perceived to be resistant to the disruptive influence of Amazon and the rapid growth in popularity of e-commerce have proven vulnerable.
The Oracle of Omaha Warren Buffett considered by many to be the world’s greatest investor also chose to weigh in on the debate earlier this year, stating at the Berkshire Hathaway annual meeting:
The department store is online now, . . .
There are a range of signals which indicate that it is only going to get worse for traditional bricks-and-mortar retailing which makes it foolish for investors to consider investing in the industry.
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North American retailers are filing for bankruptcy at a record rate this year. According to industry data over 35 retailers in the U.S. alone have filed for bankruptcy this year with some of the standout names being Toys R Us, Payless ShoeSource and Radio Shack. It isn’t the first time for Radio Shack, it filed for bankruptcy protection just a little over two years ago because of similar problems including a challenging operating environment, rising competition and dwindling sales.
. . . .
The bad news doesn’t stop there, many major department store chains focused on cutting costs by reducing their operational footprint through store closures because the unprecedented competition created by e-commerce and Amazon has left very few other options.
One-time industry leader Sears is aggressively closing stores in a desperate bid to survive. The embattled retailer closed 180 stores during the fiscal year 2017 and plans to close another 150 by the end of its fiscal third quarter which amounts to roughly 10% of its remaining Sears and Kmart locations. For the second quarter revenue fell by a deeply worrying 23% year over year while comparable store sales declined 11.5%.
. . . .
Department store chain J.C.Penney which saw second quarter comparable store sales slip by 1.3% year over year doesn’t appear to be much healthier. It has also embarked on an ambitious restructuring strategy which involves closing 138 stores over coming months.
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Long-time industry stalwart Macy’s is also planning to close 88 stores and layoff thousands of employees.
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According to the report grocery shopping’s transition to online will occur at a far more rapid rate than other industries that have already done so such as banking or media because of a greater acceptance of e-commerce among consumers.
Younger, newer and more engaged digital shoppers adopt digital technologies more quickly, and will hasten the expansion of digital grocery shopping further.
. . . .
In a stunning revelation of just how fast e-commerce sales will grow, the National Retail Federation has forecast that as a proportion of total retail sales they will expand by 8% to 12% annually. This is around three-times greater than total retail sales, indicating that e-commerce’s share of total retail sales will grow at a rapid clip.
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For the reasons discussed investing in bricks-and-mortar retailers is becoming increasingly unappealing and risky. The depth and breadth of the industry’s transformation coupled with rapidly changing technology as well as an increasing appetite among consumers to accept technological changes places almost every bricks-and-mortar retailer under threat.
Link to the rest at Seeking Alpha
PG notes that some of the recent discussions about Barnes & Noble on TPV, have tended to focus on physical bookstores vs. Amazon as an isolated battle.
As indicated by the OP here and in many other posts on TPV, the movement from bricks & mortar to online sales is a megatrend affecting all sorts of different retailers. If people buy children’s clothing online instead of going to Target and small appliances online instead of going to Sears and office supplies online instead of going to Staples, why would books be any different?
There is one additional factor that does make books special, but not in a way that benefits Barnes & Noble and other physical bookstores.
PG is not aware of eclothing or eappliances, but he and many others are regular consumers of ebooks.
Due to a combination of disastrous decisions by management and incredible ignorance of ecommerce and all other things internet, Barnes & Noble squandered the opportunity to leverage its brand and relationship with millions of longtime Barnes & Noble customers into a dominating online store for ebooks (very high profit margins once properly-designed infrastructure is in place) and physical books.
Competent management of any b&m bookstore chain should have looked at ebooks as a wonderful source of increased revenues and profits. Instead of supporting a business structure to deal with thousands of poorly-paid store employees managed by hundreds of not much better paid store managers, a relative handful of well-compensated technical, design and marketing employees located in one place could have generated expanding revenues with consistently higher profit margins.
PG appears to be suffering from an attack of run-on sentences today, so he will stop. The blindness of the entire traditional book business to the opportunities for online sales, particularly of ebooks, is prime fodder for dozens of business school lectures, case studies and discussions for decades.