Same-Site Sales Head North as Same-Store Numbers Go South
Consumers were already turning in increasing numbers to shop online before gas prices went wild. Now that consumers across the country are looking at paying $4+ a gallon at the pump, even more are choosing to get on the computer rather than in their car to go shopping.
Major chains including J.C. Penney, Gap and Victoria’s Secret have experienced healthy increases in their e-tail sales while store revenues have taken big hits.
Penney, for example, saw same-store sales decrease 7.4 percent during the first quarter. At the same time, the company’s internet sales were up 8.7 percent.
Mike Boylson, chief marketing officer for J. C. Penney, said the company has found that mall-based sales are down more than off-mall locations and online outperforms both.
“We see more people turning to online because it’s much more efficient in terms of time and money,” Mr. Boylson told The New York Times.
There’s little doubt that online has moved from a tiny sales niche in retail to the firmly plant itself in the “worth counting” category. Online’s coming-of-age was heralded recently when Moody’s, the credit rating agency, began factoring retailers’ online sales into its analyses.
“Online is starting to matter, and it is performing well,” said Maggie Taylor, vice president, senior credit officer at Moody’s Investors Service. “Now that it is big enough to matter, companies want to call it out.”
A number of retailers, including Penney and Target, have started factoring online into company same-store numbers.
Consumers, for their part, are looking for ways to cut gas consumption. Offers of free shipping are particularly attractive when consumers factor in how much it will cost them in gas to go shopping.
Some merchants including Ebags.com have started using the high price of gas as marketing tool. In an email campaign to millions of members last month, the company sent the following message: “Paying too much to get from here to there? Skip the mall. We’ll ship it to you for free.”
Some consumers, the Times article points out, don’t even mind paying freight charges.
Jessica Delmar, a manager for a technology company in San Francisco, told the paper, “A lot of shipping costs are $3 and $5. That’s even less than a gallon of gas now.”
Discussion Questions: How significant do you think the current behavioral shift is from stores to online? Will consumers who turn to the internet now continue with this behavior if transportation costs moderate? Are there any retail categories that have not reached maturity online that you think now have the opportunity to use the channel more effectively in the current economic environment?