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As E-Commerce Thrives, Macy’s, Sears Stores Close

Jan. 30, 2017
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Well-known retailers have ushered in January with plans to close physical store locations in 2017, and it could be symptomatic of issues in the industry.

Shuttering storefronts

Four days into the new year, Macy’s department store announced that it will be closing 68 stores.

A day later, Sears Holdings Corp. reported that it’s set to close 150 nonprofitable stores, including 108 Kmart and 42 Sears stores. The company is also selling its iconic Craftsman tool business.

“I would be unsurprised to see Sears and Kmart go away entirely by the end of the decade,” says Michael J. Hicks, an economist at Ball State University.

So what’s happening? In short, a lot.

An affinity for e-commerce

While brick-and-mortar stores are arguably losing their footing, cyber shopping is a popular method for purchasing everything from clothing to groceries.

The fifth annual UPS Pulse of the Online Shopper study of more than 5,000 U.S. online shoppers — released in June 2016 — found that more than 50% of all purchases made by respondents are made online.

“I think everybody from Nordstrom to Dollar General is going to continue to face online pressure,” Hicks says. Shoppers’ choices are changing, and their affinity for online shopping is being reflected in these moves toward consolidation, according to Hicks.

An identity crisis

Stores are also being forced to reposition themselves in light of a highly competitive environment, according to Jeremy Kees, a professor of marketing at the Villanova School of Business.

“Store closures are a way for [retailers] to perhaps reposition themselves to be perceived more favorably in the marketplace, especially for important demographics such as millennials,” Kees says.

Successful repositioning depends on differentiation, he adds. Sears has to decide if it wants to be known for low prices, product assortment, customer service or something else.

A foundation of value shopping

Another factor? Low-price leaders are offering competitive prices. That’s especially problematic for stores like Sears and Kmart, which focus on a lower price range than Macy’s, Hicks says. Budget-conscious shoppers may be more prone to buy from Wal-Mart.

Amazon and its prices are also a threat — not only to the stores that are closing, but also to “retail behemoths that have really owned the market,” Kees says.

Building back brick by brick

So are the days of brick-and-mortar really over? There’s still hope, according to Sylvia Long-Tolbert, a marketing professor at the Johns Hopkins Carey Business School and founder of Know More Marketing.

“How we shop has changed dramatically, and retail just hasn’t really figured out the panacea to these changed behaviors,” says Long-Tolbert. She thinks retailers have to create an in-store experience — something that draws in time-conscious shoppers with entertainment and pleasure — in order to stay relevant.

“Technology itself should be the primary factor driving innovation strategy,” Long-Tolbert says, citing advancements like artificial intelligence and virtual reality as methods to help “catapult retailers back into the physical game.” She points to Amazon Go, the cutting-edge physical store location from Amazon where shoppers walk in and out without ever going to a register with their purchases.

Kees thinks the period of retail growing pains we’re witnessing will benefit consumers in the long run, as retailers face overwhelming pressure to innovate and enhance customer service.

Brick-and-mortar stores may not disappear completely, but those that remain could start looking a lot different.

Courtney Jespersen is a staff writer at NerdWallet, a personal finance website. Email: [email protected]. Twitter: @courtneynerd.