Brick and mortar retail-store closures are hardly news these days. As older merchants try to fend off the endless assault of online retails, the hit list of dead and dying retailers only seems to grow longer.
Traditional brick and mortar retailers have huge fixed expenses such:
- Maintaining physical stores is expensive: That’s because traditional retailers need to craft an appealing customer experience for people who shop by foot.
- Labour costs are rising: Wage pressures are being felt everywhere.
If online retail takes only 20% to 30% of the "retail pie" and traditional brick and mortar retailers have same fixed high costs their profit margin will dramatically collapse making many older merchants simply no longer viable. Few can survive a decline of 20 to 30 percent in revenues. It just doesn't make any sense for all this stuff to sit on shelves.
Something has to change for retailers. They're in a death spiral of falling revenues which leads to stocking less inventory which in turns leads to losing more sales to lower cost online. Unless the whole retail industry is upended, this could be a spiral that will be hard to escape.
As Visual Capitalist's Jeff Desjardins notes, back in 2000, less than 1% of retail sales came from e-commerce. However, online sales have climbed each and every year since then, even through the Great Recession. By 2009, e-commerce made up about 4.0% of total retail sales, and today the latest number we have is 8.3%.
Update 3/7/2017 - Nike Thought It Didn’t Need Amazon—Then the Ground Shifted:
No comments:
Post a Comment