Can Department Stores Compete With Online Retailers?

Major department stores including Macy’s and Kohl’s showed disappointing holiday sales this year. This signals that they may be losing the battle to online outlets like Amazon.

Overall holiday sales are expected to be up slightly over last year. However, the way people are buying gifts continues to evolve. Online sales rose 15 percent, while sales at traditional stores fell 10 percent from a year earlier.

Department Stores See Drop in Sales

Kohls Department Store
Source: Flickr

Macy’s reported sales at its stores fell 2.1 percent in November and December 2016, compared with the same time last year. As a result, the country’s largest department store will cut about 10,000 jobs and close 100 stores. Some of those employees will be moved to other stores, about as many as 4,000 could be without a job entirely, the company estimates.

Along the same line, Kohl’s also reported a 2.1 percent holiday sales decrease from 2016 to 2015. While sales on Black Friday were strong, the rest of the season was not.

“Sales were volatile throughout the holiday season. Strong sales on Black Friday and during the week before Christmas were offset by softness in early November and December,” Kohl’s CEO Kevin Mansell said in a press release.

Both stores say they will spend time in 2017 analyzing how online can sales to make up for the in-person decline.

Online Increase

Amazon Warehouse in Spain
Source: Wikimedia Commons

According to One Click’s 2016 Shopping Season Recap, Amazon achieved significant increases in department store classifications. Categories like apparel, beauty, and furniture all saw a more than 30 percent increase in sales.

Those figures amplified as Christmas drew closer. On the Monday before Christmas, 49.2 percent of all online sales in the United States were made on Amazon, according to data from Slice Intelligence.

Last-minute sales were once a huge boost for brick and mortar stores. Until recently, shipping could not be guaranteed for items ordered online in the days before Christmas. That’s changed now thanks to Amazon Prime and other expedited shipping methods.

“It used to be with online that by Dec. 14  or 15 you would see sales hit a high and then fall off. But Amazon was still going gangbusters until the 19th,” Ken Cassar, analyst at Slice, told USA Today.

It seems the appeal of online shopping is only getting stronger as consumers are realizing that clicking a few buttons on your phone beats traveling to a store.