Consumer Habits: Strome Business Dean on Wave of Retail Closures
January 23, 2017
Jeff Tanner
Longtime retailers are cutting thousands of jobs nationwide by closing many of their locations. Macy's will shutter 68 stores this spring; women's apparel chain The Limited recently closed all 250 of its stores; and K-Mart and Sears are eliminating 150 stores. The list goes on.
Jeff Tanner, dean of Old Dominion University's Strome College of Business, said the main reason for the giant wave of retail closures is very simple: consumers are gravitating toward online businesses.
"It's a fundamental shift in how people are shopping. People are now making purchases at the Thanksgiving table," he said. "There's so much now available to us that is mobile and online."
E-Commerce (electronic commerce) and m-commerce (mobile commerce) are now considered the norm as more people are starting to enjoy swiping, clicking and tapping over a trip to the mall.
Retailers can no longer compete with popular online shopping websites like Amazon and as a result, companies can't afford the operational costs that it takes to run a traditional brick-and-mortar store. But the competition doesn't stop there. Online businesses may be growing but Tanner said stores must come up with better marketing strategies to keep the momentum going.
"Consumers are no longer just buying because it's 'available,' they are buying what they want," he said.
This past holiday season, Slice Intelligence, an e-commerce research firm, reported that Amazon dominated with 38 percent of the dollars spent online over other retailers such as Walmart, Target and Macy's between Nov. 1 and Dec 29. Amazon's market value is $395 billion.
"Online shopping websites in general can provide a much wider range of products whereas a physical store may be limited," Tanner said. "In addition to that, you have companies like Amazon that are able to reach a market directly."
Another problem contributing to the large retail decline is the amount of discount strategies stores are using in order to gain market share.
"Stores like JCPenney have trained their buyers to buy at a discount so the margin was absolutely killed," Tanner said. "You have consumers waiting for prices to drop before they buy which would drive purchases down. Short-term attempts at making more sales are not working."
Malls throughout the country have long relied on anchor stores like Macy's and JCPenney to bring in the big bucks but now that many of these stores are shutting down, the nature of traditional malls is changing.
"Anchor is not just about size, it's about attraction. These malls will end up becoming something else such as entertainment venues or communities like Virginia Beach Town Center," Tanner said. This may be the direction that we are going."