Retailers Continue Omnichannel Pivot as Stores Struggle

Major retailers including Macy’s, JC Penney and Nordstrom have taken actions lately that indicate they are placing larger bets on omnichannel as the future of retail, amid hundreds of store closings and even a chain shuttering in the wake of a tough holiday season for brick-and-mortar sales.

On the bright side, ecommerce sales are on a continued upswing, but the question is whether the pivot is coming fast enough for store chains.

The apparel category at stores, long considered a bulwark against the continued incursion of ecommerce and Amazon, has lately been slipping. During the first half of 2016, clothing sales at major retailers and discount chains fell while increasing nearly 20% on Amazon, according to TheStreet.com. And even as traditional retailers slash staff, Amazon said it plans to create 100,000 new full-time jobs over the next 18 months.

On top of that, Amazon plans to open five new physical bookstores this year (one in Chicago, two in Boston, one in New Jersey, one in Manhattan), on top of successful rollouts in Seattle, San Diego and Portland; can an extension of other store-based offerings be far behind?

Reinvestment at Macy’s

Macy’s restructuring involves closing as many as 68 of its 880 stores and cutting about 10,000 jobs. At the time the company said it would invest $550 million in new digital efforts, $250 million of it coming from cost reductions. While store sales were down in 2016, the company reported decent growth on both macys.com and bloomingdales.com.

“We continue to experience declining traffic in our stores where the majority of our business is still transacted,” said Macy’s CEO Terry Lundgren. “We are pleased with the performance of our digital business, with double-digit gains at both macys.com and bloomingdales.com; however, store sales continued to be impacted by changing customer behavior.”

Macy’s reported that its sales were down more than 2% in November and December.

Digital On the Rise at JC Penney

JC Penney meanwhile said its same-store sales for the combined nine-week November and December period was down 0.8% from 2015. But its digital efforts have been bearing fruit, according to chairman and CEO Marvin Ellison.

“We are also encouraged by a very strong performance in our ecommerce business, evidenced by double-digit growth,” Ellison said in a prepared statement. “This validates the strength of our omnichannel strategy as efforts to improve site functionality, expand fulfillment capabilities, offer flexible shipping options and introduce a broad assortment of new product categories were instrumental to this digital sales growth.”

In its last earnings call in November, Ellison said JC Penney was “committed to becoming a world-class omnichannel retailer.” In the third quarter, nearly 40% of its online orders were picked up in a store. For the holiday season, the company made several enhancements to this strategy, including an increase in online SKUs of more than 40% compared to 2015 “to allow us to continue to drive this business.”

Nordstrom’s New Innovation Title Signals Focus

And this week Nordstrom announced it had created a new title of chief innovation officer, naming former Nordstrom Rack president and 34-year company veteran Geevy Thomas to the position.

“Our business was founded and built over the years through our full-line stores, and today they still represent the largest portion of our sales volume,” Nordstrom co-president Erik Nordstrom said in a release. “However, the way customers are choosing to shop in a more digitally-connected world continues to change, and we know we need to find ways for our stores to evolve with them. This is a challenge but we also see a tremendous opportunity to leverage our stores in ways that will allow us to serve customers into the future better than anyone else.”

MCM Musings: Omnichannel has become an accepted component of the retail landscape for a few years now, but at this point in the maturity curve companies need to quickly find ways to do it more profitably even as they reinvent the customer experience across the spectrum. There will continue to be a shaking-out period as retailers painfully adjust their store footprints to accommodate the new normal, with Amazon continuing to nip at their heels. The winners will be those that can right-size in short order while making customer interactions seamless, store visits special, and order fulfillment optimized.

Mike O’Brien is Senior Content Manager of Multichannel Merchant

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