In a keynote address at the Shop.org summit in Denver this week, Jerry Storch, chairman and CEO of Toys "R" Us, passionately debunked the "myths" that the internet is causing the downfall of "big box" retailing, customers prefer online, and that the future belongs to online-only companies.
Entitling his presentation, "Episode III: The Stores Strike Back," Mr. Storch tackled the "misconceptions" one by one.
He disagreed with headlines such as "Store chains need to shrink massively and rapidly," according to multichannelmerchant.com. While Toys "R" Us' e-commerce sales are over $1 billion, "the reality is that the vast majority of sales still occur in physical stores" and most stores are more than sufficiently profitable. Said Mr. Storch, "Stores make money and they make a lot of money."
Also on the bottom line side, he discounted the vaunted advantages of e-commerce that feed the assumption that online delivers lower prices. The cost of pick & pack for the "direct-to-home model" — his term for online selling — is 1.5 to 2 percent higher than shipping inventory to stores, freight-to-home is 30 to 40 percent more expensive than fulfillment at stores, and the overall direct-to-home supply chain cost is three-times greater, Mr. Storch argued.
"Free shipping," he said, "somehow, somewhere and someday" winds up as an e-commerce cost.
On the revenue generating side, being able to touch, feel and test products; provide a sense of immediacy; and being "local" provides most physical stores an edge over online.
Moreover, also having physical stores provides the ability to allow consumers to shop wherever, whenever and however they choose. Said Mr. Storch said, "The future belongs to brands that build best the consumer-facing network, incorporating stores, Internet, mobile, social and local components."
This fall, Toys "R" Us is rolling out "Ship to Store," enabling customers to ship select online purchases to their local Toys "R" Us or Babies "R" Us store free of charge. Its popular "Buy Online, Pick Up In Store" program will be enhanced this fall by the addition of in-store pick up kiosks. Additional help is being added to stores to handle omnichannel orders.
He also told EcommerceBytes that physical stores will particularly help the expectation of same-day online delivery in the years ahead.
The following day Mr. Storch held a media event in New York City heralding how Toys "R" Us' wide selection, exclusive offerings and its first-ever Hot Toy Reservation program is helping Toys "R" Us differentiate from other physical stores.
But he ended his keynote talk by referencing his Star Wars "Episode 3 - The Stores Strike Back" theme, according to EcommerceBytes. He asked the audience, "Remember, how many episodes were there?" They replied, "Six!"
"The world will change, we will win," Mr. Storch concluded.
Do you agree that the internet is causing the downfall of "big box" retailing?