It’s not what you think it is.
If you read the news or watch it on television or the internet, you would think that most malls teeter on the edge of closing, with empty storefronts and Starbucks accounting for most storefronts. You would also think that consumers had abandoned brick-and-mortar shopping in favor of taking their business online.
In this bleak “retail apocalypse,” as the media has dubbed it, the internet — specifically Amazon.com (NASDAQ:AMZN) — has decimated traditional retail. You might think, given that bleak narrative for physical retailers, that the rise of digital would lead to shrinking sales for traditional stores during the 2017 holiday season.
That seems right, but it’s wrong. Digital sales are growing, and some brick-and-mortar chains have suffered, but holiday sales in physical stores will increase in 2017.
What’s happening with holiday sales?
Online sales are expected to reach $107.4 billion during the 2017 holiday season, according to data from Adobe (NASDAQ:ADBE) Analytics. That’s a 13.8% increase over 2016. Brick-and-mortar sales won’t increase by quite as much, but they will still be up 10%.
The National Retail Federation expects total November and December sales (excluding automobiles, gasoline, and restaurants) to reach between $678.75 billion and $682 billion. That means that Americans still spend over $5 in stores for every $1 they spend online.
Digital is growing, but the dollars are there for brick-and-mortar chains. It’s easy to blame failing stores and ailing malls on e-commerce led by Amazon, but that ignores some physical retailers that continue to grow, led by discounters such as Dollar General, Ollie’s Bargain Outlet Holdings, and TJX, parent of Marshalls, TJ Maxx, and HomeGoods. Others, meanwhile, have managed to make omnichannel retailing work, including Target, Best Buy, and Wal-Mart (NYSE:WMT).
Digitally, it’s Amazon’s world
“This year’s record-breaking online holiday shopping season is built on the strength of the big players,” said Adobe Insights Vice President Mickey in a press release. “We predict the biggest retailers with wide selections, easy shopping experiences, and free shipping, to drive online holiday growth this year.”
That makes sense, given that a recentanalysis of the prices of 52,000 items by Profitero, an e-commerce analytics company, showed that Amazon had the cheapest online prices, with Wal-Mart only 2.9% behind. The big two in online retail dominate partly because of price, but also because they have created a smooth customer experience and offer reliable, predicable delivery.
Call it a retail shakeout
The reason the “retail apocalypse” narrative has emerged is that people see well-known stores closing or struggling. That has certainly happened, but as some chains struggle and even go out of business, others have emerged to take their place.
Clearly, retail has begun a major shakeout that’s going to continue. Some companies won’t survive, but retailers that give consumers a reason to leave their house will. That reason might be pricing, or it could be the experience of shopping in a certain store, but chains that figure out how to make their stores a destination will continue to thrive.
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