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Why Have So Many Retail Stores Closed?

Simple—Because Online Sales Have Increased. 

Bloomberg Markets reports that sales by U.S. retailers declined in December 2016 even though holiday sales outpaced experts’ forecast. They also noted that this was the weakest year in retail since 2009.

Companies like Sears and Macys are even closing some of their locations around the country. The reason? – More consumers are shopping online rather relying on brick and mortar retail stores.

Luis Alvarez, CEO of the Alvarez Technology Group believes that we’ve reached the inflection point where the growth of online sales is now impacting traditional retail sales. Sears, Macys and others made the mistake of basing their operations purely on population growth without considering the availability of online shopping.  Now they must close down many of their stores due to a decline in sales.

Why Online Shopping Has Increased

Last year experts predicted that online total sales would increase by three to four percent.  However, in reality they increased by over 13 percent.  Consumers are now comfortable using online shopping, and they find that it has benefits over traditional shopping.

  • It’s not only more convenient than getting in the car and going to a store, but they don’t pay any more than they would at the retail store. Plus, they get free shipping in many cases.
  • They often get frustrated when they can’t find a particular item in a store. When shopping online they don’t have this problem.
  • Retailers often stock seasonal items. If they want to buy a bathing suit in January in a northern location they’ll likely have trouble finding a decent selection. But not with online purchasing. Consumers have more options to choose from, and can comparison shop easily.

What Retailers Are Doing To Compete.

The United States is overbuilt in retail space. We have 24 square feet per capita of retail space where Canada only has 16 square feet per capita – a third more.  At present, we have one billion square feet of retail space that needs to either be repurposed or negotiated down for rents and other costs.

Some retailers have come to the reality that brick and mortar shopping today is much more about the experience than for purposeful shopping.  Walking through a mall and window shopping can be entertaining and fun for people.  The smart retailers are creating a more experiential environment rather than stocking their stores with every item possible. They know that folks can find what they don’t stock easily online.

These large retailers may end up going smaller altogether.  Perhaps you remember the days when you’d go to a small Sears Catalog Store, look through their catalog, place an order for an item and go back to the store to pick it up.  You knew your purchase would be stored securely at the store until you returned to pick it up. However, with online shopping you may worry that a delivery left on your porch will be stolen.  Some retailers are considering opening these smaller catalog stores once again.

What about the large 100,000 square foot stores? They may be subdivided into stores with a smaller footprint where shoppers can still walk and browse, or perhaps into something else entirely.

What we do know is that because of the increase in online shopping we’re seeing a shift in retail shopping.  It will be interesting to see who the winners and losers are based on the ideas they put in place. Until then, for most, online shopping is the way to go!

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    Salinas, CA 93901

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