Some US re­tail­ers still bet on brick and mor­tar

Bangkok Post - - BUSINESS - MICHAEL CORKERY

NEW YORK: One morn­ing last month, Tar­get Corp’s chief ex­ec­u­tive, Brian Cor­nell, stood amid racks of de­signer T-shirts and a cooler filled with prepack­aged sand­wiches in a store in Mid­town Man­hat­tan.

“This is re­ally a sym­bol of the fu­ture,” he said.

Cor­nell wasn’t talk­ing about an e-com­merce ware­house staffed by ro­bots. Nor was he speak­ing into a voice-ac­ti­vated de­vice that knows just how much toi­let pa­per a cus­tomer needs.

He was dis­cussing Tar­get’s new store near Her­ald Square in New York City, down the block from Macy’s flag­ship store and other na­tional re­tail chains. It is one of about 130 smaller for­mat stores Tar­get has opened or plans to open by the end of 2019. The new stores are scaled back ver­sions of the big-box Tar­gets that pre­dom­i­nate in the sub­urbs.

The com­pany’s store strat­egy stands out at a time when just about ev­ery­one seems to be ques­tion­ing the rel­e­vance of brickand-mor­tar re­tail. Ama­zon.com is seiz­ing an ever-larger share of con­sumers’ wal­lets, re­duc­ing foot traf­fic to stores.

Such pres­sures have con­trib­uted to a string of re­cent re­tail bank­rupt­cies, in­clud­ing Toys “R” Us, Pay­less, Gym­boree and Ra­dio Shack. Sears and Macy’s have also been clos­ing hun­dreds of stores around the coun­try as they strug­gle with slip­ping sales.

Last month, the com­pany that owns Lord & Tay­lor sold its fa­mous flag­ship Fifth Av­enue store to WeWork, a startup cater­ing to mil­len­ni­als in need of shared of­fice space. The deal was seen as a vivid re­minder of how the al­lure of the de­part­ment store has faded.

But for all the gloomy un­cer­tainty that sur­rounds the in­dus­try’s fu­ture, stores will most likely re­main at the heart of re­tail­ing for a long time — even as they evolve to meet the de­mands of the mod­ern shop­per.

The re­tail in­dus­try has been push­ing back against the pes­simism. This sum­mer, the IHL Group, a re­tail and hos­pi­tal­ity ad­vis­ing firm, pro­duced a re­port that showed re­tail­ers will open more new stores than they will close this year. (Most of the growth, how­ever, came from restau­rant open­ings, not new de­part­ment stores or big box re­tail­ers.)

“The neg­a­tive nar­ra­tive that has been out there about the death of re­tail is patently false,” Greg Buzek, the group’s pres­i­dent, said in Au­gust.

Some of the big­gest growth in brickand-mor­tar stores is com­ing from dis­count re­tail­ers, like TJX, the par­ent com­pany of T.J. Maxx and Mar­shalls. E-com­merce may of­fer con­ve­nience and in­stant grat­i­fi­ca­tion. But shop­pers are still will­ing to go into a store to hunt for a good bar­gain.

In Au­gust, TJX said that over the “long term” there was an op­por­tu­nity to open as many as 5,600 stores, up from the 1,700 the re­tailer cur­rently op­er­ates.

Wal-Mart Stores Inc, the na­tion’s largest re­tailer, has slowed its brick-and-mor­tar ex­pan­sion, though it con­tin­ues to open stores, par­tic­u­larly smaller for­mat ones.

The com­pany is also us­ing its vast store net­work — lo­cated in nearly every cor­ner of the coun­try — to sup­port its e-com­merce busi­ness.

Re­tail­ers like Wal-Mart are hop­ing they can build a more prof­itable busi­ness that in­cor­po­rates both brick-and-mor­tar and on­line shop­ping — a strat­egy known in the in­dus­try as “omni-chan­nel.”

Still, e-com­merce con­tin­ues to grow at a blis­ter­ing rate, far out­pac­ing the in­crease in over­all re­tail sales. Un­less that growth abates, an­a­lysts and econ­o­mists ques­tion how so many stores — from sub­ur­ban malls to hip bou­tiques — can sur­vive.

“E-com­merce is putting ex­treme pres­sure on brick and mor­tar,” said Mark Zandi, chief econ­o­mist at Moody’s An­a­lyt­ics. “This re­ally f eels like a wa­ter­shed mo­ment.”

Tar­get is bet­ting its stores will win out. It boosted sales at each ren­o­vated store by as much as 4%, said Cor­nell, the CEO.

The com­pany now ful­fills about 50% of its cus­tomers’ on­line or­ders from its stores.

Tar­get also re­cently said that it was rais­ing its start­ing wage to $11 an hour and planned to in­crease it to $15 by 2020 — part of an ef­fort to at­tract and mo­ti­vate its work­ers to of­fer strong cus­tomer ser­vice.

“Our stores are our core strength,” Cor­nell said.

THE NEW YORK TIMES

Tar­get Corp’s new store near Her­ald Square in New York City is one of about 130 smaller for­mat stores the com­pany has opened or plans to open by the end of 2019.

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