TOMLINSON
Activist investor Bill Ackman bought up shares in 2010 and fired CEO Myron Ullman. Ackman hired Apple’s retail chief Ron Johnson, who decided to reinvent the shopping mall-staple to attract wealthier customers and stop behaving like a value retailer. He drove away the few remaining customers and attracted fewer new ones.
By 2012, sales plunged by $4.3 billion. The company shuttered stores, laid off workers, fired Johnson and brought back Ullman. But the damage was done, and the company struggled to pay for an online presence and store renovations.
Ullman soon left, and executive turnover continued. Today, after a year under a new CEO, Penney’s is still in freefall. The stock has dropped 25 percent this year, same-store sales were down 9 percent year-over-year in the second quarter, and the share price was recently 78 cents.
Target took another tack after the recession, getting back to its “cheap chic” roots with new, affordable in-house brands. The company closed and downsized some locations, but opened new, smaller stores in high-density neighborhoods that increased convenience. CEO Brian Cornell also didn’t skimp on developing a powerful e-commerce capability.
The company then married online shopping with advanced inventory management, in-store pick-up and same-day shipping.
“These options offer speed, convenience and reliability,” Cornell told analysts on a quarterly earnings call. “And as a result, they’re quickly becoming the fulfillment choices for our guests. And most importantly, because these options leverage our existing in-store infrastructure, technology and teams, same-day fulfillment delivers outstanding financial performance as well.”
Target exceeded Wall Street expectations last quarter, with same-store sales up 3.4 percent year-over-year. Its stock price set record highs. Consumers prefer brick-and-mortar stores when they deliver the goods they want when they want it. A supposed liability turned out to be an asset.
Customers are also reaching their fill with online shopping. Year-over-year retail sales growth slowed from 6 percent in early to mid-2018 to the mid-3 percent range later in the year, according to research by FTI Consulting, which advises retail and other businesses.
“Our forecast model for U.S. e-commerce retail sales in the aggregate indicates that online sales growth may have hit an inflection point and may experience decelerating growth going forward,” the report said. “U.S. online retail sales will be a trillion-dollar category by 2025, though all of our annual estimates have come down a bit compared to last year.”
Amazon remains the largest online retailer, but the brick-andmortar stores are aiming to take a bite out of the online giant’s growth. Walmart, H-E-B and other grocery stores are developing in-store pick-up, curbside pick-up, and delivery options that will keep loyal customers close and attract others who do not yet use Amazon to buy food.
Brick-and-mortar retailers are also offering more pleasurable and exciting in-store experiences that provide the perfect setting for an Instagram post. Others are relying more on pop-up strategies, so they open only when there is customer demand.
Consumers want convenience, low prices and a pleasant purchasing experience. E-commerce sites offer those things, but that doesn’t mean brick-and-mortar can’t compete.