By all accounts, 2016 was a good year. U.S. unemployment fell to its lowest rate in 10 years, wages rose, and consumer spending was up. Fixed nonresidential investment, a measure of business spending, rose at a 1.4% pace in Q3 and spending on structures rose at a 12% pace (source: Wall Street Journal, 12/22/16).
And yet, Sears is closing 150 more stores. Macy’s is closing 100 stores. Limited is closing all 250 stores and filing for bankruptcy. Even Walmart laid off 2,000 employees last Fall and hundreds more face pink slips in 2017. Sadly, U.S.-based retailers are not alone. British Home Stores (BHS) is going through the U.K. equivalent of Chapter 11 and must determine what to do with their 164 stores and 11,000+ employees. All over we see exurban malls turning into ghost towns and in-town malls struggling to keep tenants.
If the economy is doing better, why are retailers suffering?
We all know why and are complicit in contributing to the problem. Amazon posted revenues exceeding $30 Billion last quarter and expected to top $120B for the year! Overstock.com, Buy.com, Shop.com, Wayfair.com all had record years. German online reseller Buromarkt Bottcher saw 54% growth and Alibaba continues to extend its reach. And it’s not just virtual retailers. Fifteen of the Top 25 U.S. e-commerce retailers are brick and mortar brands. To wit, over 50% of Staples’ annual sales comes from e-commerce (source: eMarketer).
Staples is just one example of how the office products marketplace has transformed. As buyers shift their purchasing patterns, we must meet them there. Unfortunately, we now bump into new competitors. In April 2015, Amazon launched its business channel in the U.S. and achieved over $1 Billion in less than one year! Amazon leverages extreme brand awareness, the #1 shopping platform, free two-day shipping, and very low pricing. For manufacturers, Amazon makes a very compelling offer. The problem is that Amazon is very predatory particularly if unprepared or uninformed.
Daunting as it all sounds, this should NOT keep manufacturers and resellers from entering the online waters. On the contrary, embrace the opportunity. But embrace it with a clear, informed strategy.
The online channel is certainly a growing tidal wave of change, getting bigger and bigger every day. And Amazonian sharks exist. These concerns should not keep sellers out of the digital water. Rather, grab a surfboard and hop in. With some deeper understanding and careful planning, online marketing can effectively extend your reach beyond the shores of brick and mortar!
