Retail chains in the US are going through a churn thanks to e-commerce. As more and more customers buy online, large retailers are having to re-think how they attract customers and some may not make the transition. Studies show that departmental stores suffered a 6 per cent fall in sales while online retailers saw a 11 per cent increase last year.

One iconic chain that is particularly hit badly is the over 130-year old Sears. When I visited a nearby outlet, I found that the store had vacated a whole floor and moved all departments into one floor, to save costs. Sears Holdings Corp., the parent company that owns both the Sears and Kmart chain of stores, has seen seven straight years of losses. The current majority shareholder, Edward Lampert, who is also the company chairman is a hedge-fund manager who invested in the company with hopes of turning it around and making a profit. That possibility seems quite bleak now and the company’s share price has fallen about 40 per cent in the last year.

On sale

Companies in a turnaround are often caught in a vice and have to make contradictory decisions. One of them is with regard to what assets to hold. While their revival would require them to build on the strong parts of their business, the reality of the market forces them to sell those same valuable assets to raise the cash needed to invest in areas that would fund the turnaround. Lampert has been selling both real estate and valuable brands such as Craftsman (known for tools) and Lands’ End (apparel) to raise money. At the end of it all, one wonders what will be left.

JC Penney, a 114-year old chain, is also planning to sell about 140 stores and has also announced a voluntary retirement scheme for employees. Penney is planning to shift its focus by cutting apparel and increasing home goods like appliances, less impacted by online sales. Macy’s, another retailer hit by the trend, is also planning store closures and sale of real estate.

Those who have weathered

On the plus side, some retailers have been able to cope with the changing habits of customers. TJX Corp. which owns the TJ Maxx and Marshall’s chains selling brand name clothing at discounted rates, is planning on opening about 1800 new stores, a 50 per cent increase. Walmart is also going through a major transformation. It has maintained earnings and is planning to slow down its new supercenter openings and instead focus on e-commerce.

Of course, the challenger who is forcing all the change and transformation is Amazon. Although all the major retailers now have an online division, Amazon enjoys its first-mover advantages. It has expanded into almost every product line. Its sales are reportedly growing at about 20 per cent. Amazon is riding the wave of changing buying habits; how we search for items, compare prices, check reviews, and arrange for fast shipping. Those understand these changes and realign strategies will survive.

It was reported recently that Amazon plans to open grocery stores primarily selling perishables (which you would not normally buy on-line) in a brick-and-mortar format. They already have one on trial at Seattle. Ironically, Sears began in 1886 as a mail order catalogue company and began opening retail outlets only in 1925. Are we coming a full circle?

The writer is a professor at Suffolk University, Boston

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