Online Holiday Shopping Taking Its Toll on Traditional Stores

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Online Holiday Shopping Taking Its Toll on Traditional Stores

Online shopping, especially around the holidays, has been a major factor leading to the bankruptcy  of previous retail giants such as Sears.

Online shopping, especially around the holidays, has been a major factor leading to the bankruptcy of previous retail giants such as Sears.

Online shopping, especially around the holidays, has been a major factor leading to the bankruptcy of previous retail giants such as Sears.

Online shopping, especially around the holidays, has been a major factor leading to the bankruptcy of previous retail giants such as Sears.

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In the relatively new age of Amazon, retail stores are taking the heat. Department stores such as Kmart, Sears, and JCPenney are on the paths to decreased sales and even bankruptcy. Many have adapted to the tech-savviness of today by introducing apps designed to allow people to purchase and browse items directly from their phones. Others, such as Barnes & Noble for instance, have responded to the decline in in-store sales by constructing cafes/eating areas inside their shops and improving their loyalty programs. Nevertheless, there is certainly a rise in online shopping, and this trend is certainly not benefitting retail stores.

The established dominance of online shopping is certainly illustrated by the now bankrupt and defunct Toys R Us. Once an extremely popular place to buy holiday gifts and toys for many generations of children, competition with online sources such as Amazon and other stores such as Walmart and Target led the company to file for bankruptcy in 2017 and to close up all 800 stores in America in 2018.

Amazon, as well as Walmart, will likely capitalize on Toys R Us’s demise. As the number one leader in online sales, Amazon is winning over people who are ditching stores to shop online for toys instead. In December 2016, 14.7 percent of parents with children under nine said they went online to purchase toys, compared to 7.3 percent in 2011, a report by Coresight Research found.

A similar trend is likely to transpire this holiday season. However, in this technologically advanced world in which we live, the digital and physical universes are colliding, with few companies embracing one over the other. For example, Amazon, like several other companies that once solely focused on e-commerce, are now opening physical stores. This should only keep on boosting sales for the mega-giant company and divert sales for companies who cannot adapt to the times.

Another instance of this globalizing trend is provided in the Blockbuster Video case. Due to the popularity of online streaming and services such as Netflix, the necessity of DVDs and CDs had declined to the point that the American-based provider of home movie and video game rental services had to cease operations in 2013.

Today, department store chains Sears, J.C. Penney and Neiman-Marcus are also struggling, as well as strip-mall stalwarts Kmart and Bed Bath & Beyond. Mall retailers such as Claire’s, Charlotte Russe, Payless, Sears, GNC, and Rue21 are either showing signs of suffocation or have already defaulted on their debts since the start of 2017. “With the economy doing pretty well and consumer spending doing pretty well, these companies … are still defaulting” because of their sagging business prospects, says S&P Global Ratings managing director Robert Schulze, who tracks retail. This common occurrence highlights the prevalent belief that the Internet and its companies are dominating not only the digital world, but the physical world as well today.

The statistics from this past Black Friday and Cyber Monday only reinforce this assumption. According to Adobe Analytics, Cyber Monday was the biggest sales day of the year with online revenues of $7.9 billion, an increase of 19.3 percent over 2017, with over half of the visits coming from mobile devices. In contrast, in-store foot traffic on Black Friday fell by 1.7 percent compared to last year. While online sales soared, the period from Thanksgiving through Cyber Monday also was marked by a decline in the total number of shoppers and store foot traffic, according to National Retail Federation consumer survey results.

Big purchases between this Thanksgiving and Cyber Monday were clothing, gift cards, and toys that had been hard to find because of the liquidation of Toys R Us. For East Hampton entrepreneur Casey Powers, owner of Ecocentric Mom, an organic and eco-friendly products subscription box business that operates online only, Cyber Monday is usually one of the biggest days of the year but with fewer sales than Black Friday. That changed this year. “We sold less on Black Friday and more on Cyber Monday,” Powers says. “So in the end, for the weekend as a whole, business went as well as it has in past years.”

No longer is the Thanksgiving weekend solely a time of family interaction. And no longer is Black Friday a single day that marks the beginning of the holiday season. Black Friday has been transformed into a holiday season in and of itself, full of mass consumerism and materialism that stretches beyond the Friday from which it originated. Ironically, the term did not originally apply to holiday shopping, but to a U.S. gold market crash in 1869.

Incorporating Small Business Saturday and Cyber Monday (which was created in 2005 by online retailer, the entire weekend consists of holiday shopping. But in recent years, many people have decided to skip the lines and stay in the comfort and security of their homes, likely wearing their pajamas as they purchase marked-down products online during Cyber Monday.

Barbara Kahn, a marketing professor at the Wharton School of the University of Pennsylvania and author of The Shopping Revolution puts it this way: “Before the internet came around and changed the nature of shopping, brick-and-mortar – well, it was all brick-and-mortar back then – had to have these great sales to get people in the store.” In recent years, however, the rise in e-commerce has made Black Friday shopping easier for both retailers and shoppers, so no longer are most “people camping out for two or three days in advance,” she explains.

With the rise of store websites and easily accessible apps in which individuals can purchase items directly from their mobile devices, the need for increased staff, inventory, and higher operational costs at specific shop locations during the Black Friday weekend has started to lessen in the last few years.

There are several reasons that people turn to online resources to meet their shopping needs. Most of it is simply out of convenience. In a matter of minutes, one can quickly pick out what they want, order it, and have it shipped to wherever and whomever they choose, whether to themselves or to a distant relative or friend far away. There is no need to worry about lugging around bags of goods when they can be shipped directly to one’s door. Many people also like shopping online because they have the ability to read millions of reviews on various assortments of products and search for the cheapest deals without even getting off the couch.

Some brick-and-mortar shops (traditional businesses that deal with their customers face-to-face) are able to withstand the online pressure. These stores typically are auto-parts realtors, grocery and beverage stores such as Costco, gasoline stations, and traditional bars and restaurants. The nature of their merchandise and consumer preferences are some factors that induce customers to travel physically to these types of stores. While some individuals prefer to not be distracted by the various products in a supermarket or department store, others are more inclined to buy their items in person (for example, trying on clothes before they purchase it).

Similar to how Barnes & Noble adapted to the times, other retailers such as T.J. Maxx and Marshalls (part of parent company TJX Companies) and specialty chains like Best Buy are proving that retailers can succeed when they cater to their customers’ preferences. TJX has produced loyal customers with its treasure-hunt-style shopping experience, while Best Buy has cleverly integrated its digital and physical stores.

While the pattern does appear to be in favor of online retail during the holidays (such as Thanksgiving and Christmas), the statistics of this year’s Black Friday do illustrate one thing: people still hold a special place in their hearts for Black Friday and its traditions. Although the numbers are decreasing, many individuals still venture out of their homes to wait on the long lines (sometimes in the bitter cold) on Thanksgiving night, hoping for the best deals for toys, electronics, and other products that they can present to their friends and families. Technology has most certainly made its mark, but it has not completely annihilated the physical world of retail just yet.

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