Brick and mortar stores finding way through online challenge
Oct. 28, 2017
TUPELO, Miss. (AP) — Neilson's Department Store, which opened in 1839 and is the oldest store in the South, has survived wars and economic downturns during its 178-year history.
But the store may be facing its greatest challenge to date — the online shopper.
"Online shopping is easily the most significant competition we have encountered in my experience," said Will Lewis Jr., whose family owns the Oxford store.
But the Lewises aren't wringing their hands hoping something will happen. Like many store owners, they've made adjustments to their business model to stay competitive.
"The younger generation in our family-owned business made me realize that this era had arrived, so about three years ago, we embarked on a new business plan, rented 3,500 square feet to a restaurant, remodeled and downsized the lines we carried to attempt to avoid what could be found in abundance on the internet," Lewis said. "At the same time, we hired a general manager who had been in the market and knew how to better deal with vendors who could help us try to be unique."
With the lucrative Christmas holidays around the corner, retailers are doing all they can to capture every dollar they can, whether it's the customer walking through the door or the customer clicking on their website.
"We hope to be in a niche in the market where the customer wants to see what they are buying, and we have to think that market will be there in some form," Lewis said. "I am glad I have the young generation to deal with the future. I don't know what technology will bring to small business."
A hint of the future happened just last year.
For the first time, shoppers made more purchases online in 2016 than at a traditional brick-and-mortar store.
But that shouldn't be a big surprise, as retailers have seen the train coming, with whistle blowing. In 2015, consumers did 48 percent of their shopping online, 47 percent a year before that.
"I shop online almost as equally as I shop in stores," said Polly Godwin of Saltillo. "I am a bargain shopper so I look for deals."
Barbara Giacometti of Tupelo says her shopping habit is more dependent on where she can find a particular product.
"Although I have always preferred to shop locally, it's becoming impossible at times to find products due to some stores cutting back on inventory," she said. "It's less stressful to find things online rather than bother wasting precious time and money looking for certain goods. I have noticed CVS, like many other retailers, are offering better prices online than they do in stores. Is it fair? Are they cutting off their nose to spite their face? I would say yes."
The Amazon Effect
There is no question that Amazon has been the force behind the explosion in online shopping.
Since the start of this year, retailers have announced more than 3,100 store closings. Much of the blame is placed at the feet of online shopping, which allows customers to shop for practically anything, anytime and anywhere, all with a click, tap or swipe.
Mike Breazeale, an assistant professor of marketing at Mississippi State University, said many retailers have failed to embrace the changing habits and tastes of consumers.
"All the closings are because retailers are either not understanding the online marketing end of their marketing mix or their unwillingness to alter what they do in their stores," he said. "To me, you have to have a good omni-channel mix to work on your online experience as much as your in-store experience. So much about keeping that in-store experience alive is about keeping the experience where you can't get anywhere else.
"People will continue to shop in stores as long as there's value in it. Some of the boutique stores and smaller retailers aren't hurting as much as the large chain stores because (the chain stores have) gone away from the real customer service that made people come in the first place."
And even the world's largest retailer has felt the heat of Amazon's internet prowess.
Last year, Walmart's sales totaled $483 billion, compared to Amazon's $136 billion. But while Walmart's online revenue was a healthy $15 billion, Amazon's was a staggering $90 billion.
And consumers are only going to shop more online.
According to a Pew Research Center survey in 2016, nearly 80 percent of U.S. shoppers have bought something online, and nearly one-third shop online regularly. In 2000, when Pew asked the same question, it found only 20 percent of shoppers had purchased online at some point.
But brick-and-mortar stores still are holding their own.
According to Pew, "Overall, 64 percent of Americans indicate that, all things being equal, they prefer buying from physical stores to buying online. Of course, all things are often not equal — and a substantial share of the public says that price is often a far more important consideration than whether their purchases happen online or in physical stores."
Pew said 65 percent of Americans indicate that when they need to make purchases, they typically compare the price they can get in stores with the price they can get online and choose whichever option is cheapest.
So what do retailers need to do?
No matter their size, they must adapt.
Walmart said it expects to "crush it" in the next few years when it comes to online shopping.
Marc Lore, chief of Walmart's e-commerce business in the U.S., told the Wall Street Journal, "E-commerce is a scale game. We're looking at a lot of different things right now, everything, in every sector."
To boost its online capabilities, Walmart has been on a buying spree. In recent years, it's snapped up Jet.com, Bonobos, ModCloth, Moosejaw and ShoeBuy. It has expanded in-store pickup efforts as well as pilot programs in home delivery using Uber and its own employees. Walmart recently announced the acquisition of Parcel, a same-day delivery service based in Brooklyn, New York.
Reed's department store, founded in Tupelo in 1905, has three stores in Tupelo and Starkville. It's no Walmart, but it is stepping up its online presence, especially with Black Friday and the holiday season looming.
"We're streamlining our online presence to make it more customer-friendly and easier for our customers to order from Reed's online directly from our website," said Annabeth Wyatt, marketing director. "We are continuing to feature everything from signed books, Reed's T-shirts, Reed's cheese straws, Ronaldo bracelets to apparel. We are looking forward to showcasing online segments which depict what's hot and gift ideas at Reed's throughout the holiday season."
Wyatt said the new look online also will be visible throughout Reed's social media presence as the store posts links to its website so customers can order directly.
"It's one more way we are trying to reach our customers and let them know that Reed's is here and ready to help them shop."
Paul Zahra, a global retail adviser for Pricewaterhouse Coopers, said, "If businesses aren't constantly improving, competitors, both old and new, are ready to surpass them. And once they've been overtaken, it's hard to catch up again."
The shopper's buying habits have forever changed. Last year, more than one-third said their mobile devices are their preferred shopping tool. On Black Friday of last year, a quarter of all sales were made on smartphones and another 11 percent were made on tablets.
Zahra said brick-and-mortar retailers will have to evolve to compete against the rise of online shopping.
"Changes in shopping behavior, coupled with the rise of e-commerce, means that retailers have started to seriously rethink and refine the purpose of their physical spaces," he said.
"Traditional stores could be downsized, existing floorspace turned into showrooms or fulfilment centers for local web orders, or stores could become more of an experiential space for customers."
The experience is important, but so is having the product readily available, said Giacometti. If customers are forced to go online to find and buy want they want, that affects the brick-and-mortar location.
"Poor sales equals local job cutbacks," she said. "Cutbacks mean store closings. I guess there's no happy ending. With many retailers offering free delivery it's just hard to beat shopping online. When one takes into consideration gas prices and traffic, it's all some very good incentives to stay home and shop online."
Information from: Northeast Mississippi Daily Journal, http://djournal.com