Retailers learning how to outfox Amazon
Successful holiday season shows department stores can compete
After a successful holiday sales season, department stores are showing signs that they have figured out how to fight back against online giant Amazon — or at least hold their own.
In the process, they are creating a playbook rivals are sure to study to show how store-based chains can successfully compete against those who get most of their sales online.
With their traditional business models threatened, retailers got creative. They formed interesting new partnerships, tried to make in-person shopping more entertaining and cranked up their own e-commerce efforts. And it paid off.
“What retailers can learn from the holiday is if you spend money and resources on an online business, it can be a compelling addition to your brickand-mortar business,” says Charles O’Shea, senior retail analyst for Moody’s Investors Service.
Target, Kohl’s, Macy’s, J.C. Penney and Nordstrom reported stronger than expected holiday sales that contributed to an industry-wide sales bump of 4.9%. That was the biggest increase since 2011, according to Mastercard SpendingPulse, and provided a welcome reprieve from a drumbeat of bankruptcies and store closures that have roiled retailers in recent years.
Traditional retailers seemed to be more adept this holiday season at blending the best of both the online and in-store experience. Here are some of the ways they succeeded.
They formed partnerships
J.C. Penney made the most of a collaboration with beauty giant Sephora. With roughly 75% of J.C. Penney stores scheduled to have in-store Sephora locations by the end of 2017, GlobalData analyst Anthony Riva said in a note the cosmetic hubs likely helped attract shoppers who then stayed and bought other products.
Meanwhile, Kohl’s didn’t fight Amazon, it embraced it in a way aimed at mutual benefit. It launched a partnership with Amazon in October that placed Amazon shops in 10 Kohl’s stores in Chicago and Los Angeles. Those locations also accept returns of products sold on Amazon.com.
“Anything a brick-and-mortar retailer can do to get you into the store has to be viewed favorably,” O’Shea says.
The payoff: Kohl’s sales in the last two months of 2017 rose 6.9% as compared to the holiday season the previous year. J.C. Penney reported a 3.4% sales bump during the holiday season.
They became top brand destinations
Target, which also saw a 3.4% uptick in sales in November and December, wooed shoppers with the debut of new brands such as A New Day, Goodfellow
& Co., JoyLab and Who What Wear. For home goods, it launched Home & Hearth with Magnolia in collaboration with Chip and Joanna Gaines, the popular hosts of the HGTV series Fixer Upper. Meanwhile, Kohl’s doubled down on offering its own private brands that make it a destination for shoppers who can’t find those items elsewhere.
They made getting purchases more convenient
Some retailers offered the best of both the store and online worlds by making it possible for shoppers to pick up gifts they purchased online without having to set foot out of their cars. Toys R Us offered the option of curbside pick-up at 28 of its stores. Target was testing the perk at 50 stores in Minneapolis and St. Paul. In a limited-time experiment, Nordstrom gave shoppers the option of around-the-clock curbside delivery at 10 stores in the weeks before Christmas.
This year, Target is seeking another edge: It is paying $550 million to buy online delivery company Shipt to enable it to drop off groceries and other items at customers’ homes within hours of their being ordered online.
They made it easier to click and buy
Macy’s CEO Jeff Gennette said his “primary focus” was bolstering the chain’s online presence. Macy’s online sales spiked by double digits while sales in stores — which he also said he wanted to improve — open at least a year ticked up 1.1%. Active apparel, fine jewelry and beauty products were particularly popular.
Now the question is whether retailers will resume cutting their store networks as deeply as they did last year.
Macy’s, which announced in 2016 that it would be closing 100 stores, revealed seven of those locations last week. So far, it has announced 81 of the storefronts that will be shutting. Those closures, along with a paring back of staff at some locations still open, will result in the loss of 5,000 jobs.
Neil Saunders, managing director of GlobalData Retail, highlighted in an analyst’s note how Macy’s holiday success did not mean it had regained its fi- nancial footing.
“We recognize that changes have been made and are starting to have a slight positive impact on performance,” Saunders said. “However, these results are simply not strong enough to suggest that Macy’s has transformed the business, nor that future success is guaranteed.”