The Shifting Winds in Retail

By Beth Corby

source: fPat Murray/Flickr

JCPenney is down to its last cents. In March, the company announced it would close 138 department store locations, and its stock hit an all-time low price of $4.73, less than its opening day price in 1978. Its sales figures have shown a desperate downturn, down 37% from 2006. All roads lead to bankruptcy for the once-respected retailer.

What went wrong?


After the financial crisis, JCPenney was poorly positioned to adapt to changing consumer behaviors. They were dependent on foot traffic from suburban malls, which were failing because too many had been built, people were buying less, and online shopping was gaining momentum. They were loath to build a satisfying e-commerce experience because their core customers skewed older and less tech-savvy. Even now, search “JCPenney mobile” and the first result is a physical store location in Mobile, Alabama.

The fall of JCPenney marks the end of an era of American shopping, one that relied on customers seeking a particular kind of convenience — a one-stop destination where you could get everything you needed, from big-and-tall suits to BBQ brushes, at middling prices. As the megastore dies out, however, new modes of shopping are taking its place.

Welcome to the ‘Death of Retail’

The demise of JCPenney is part of a larger phenomenon that has grim reaper analysts announcing the “death of retail.” With Amazon and other online shopping outlets offering a greater selection of goods than ever before, customers no longer need the bundled convenience of department stores and shopping malls. A forecast from Credit Suisse predicts that by the end of 2017, 8600 stores will close, and by 2022, 25% of American shopping malls will no longer exist. As of March the report seemed to be on track, with 3571 closures announced. JC Penney sits in the troubled company of its competitors, including Sears, Macy’s, Dillard’s and Nordstrom, who are all downsizing. In May 2016, 6,000 in-store retail jobs were lost.

source: Forbes/Green Street Advisors

On the other hand, Amazon is seeing enormous growth. In 2015, Amazon announced $82.7 billion in sales, compared with Walmart’s $12.5 billion. Amazon has quite literally eaten other retailers with acquisitions of Whole Foods and Zappos. In an incredible statistic, half of U.S. households have Amazon Prime subscriptions. Industry standards are being reset in Amazon’s image. In order to survive, retail brands have to offer free shipping and returns, lower price points, instant checkout and delivery everywhere.

source: Business Insider/Bloomberg/Deutsche Bank

Consumer preferences don’t indicate that Amazon should be the only shopping option on the planet, however. Buyers still want the personal care and attention that specialty shops offer and the prices that big, efficient businesses do. They want to identify with brands. And finally, they want the shopping experience to be stress-free. The changes in shopping are only making the retail industry more democratic, competitive, and crowded than ever. Go to the full article.

Source:: Business 2 Community

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