Printed from BusinessInsurance.com

Retail caught flat-footed by e-commerce

Posted On: Apr. 3, 2017 12:00 AM CST

At its root, retail industry experts blame the fall in the number of traditional stores on the ease of click-and-buy, unlimited supply, two-day deliveries and free returns.

This change in the retail business model, coupled with overexpansion of stores in the past two decades, led to the current challenges facing the retail-store industry, experts say.

“People are shopping online and (that business is) growing so fast that it is cannibalizing other businesses,” said Greg Portell, Chicago-based lead partner in the retail practice of consultancy for A.T. Kearney Inc., a management consulting firm.

“The other big driver is the appeal has vanished for department stores. (Stores) used to be the one place where you could get a lot of brands and items under one roof. The internet does that better,” he said.

Karen Raquet, Philadelphia-based director of retail property management for investment management firm Jones Lang LaSalle Inc., which specializes in commercial real estate, said store closures are in line with the trend of “right-sizing” after overestimating the demand for store space.

“Retailers are reinventing themselves,” she said, adding that she expects the wave of store closures to continue.

“They over-expanded in the past … before e-commerce became possible … and now they are looking at profitability and right-sizing.” But don’t expect all stores to go away, she added. An ironic sign of the ever-changing times: Amazon.com is now opening stores. “It’s important for retailers to have both (an online presence and a retail presence),” Ms. Raquet said.

“It’s critical to their success as a retailer. People need still need to touch and feel … the strength of e-commerce has to do with store locations.”