Are chains cannibalizing their own in-store sales with e-commerce?
Steven Miller, CEO of Big 5 Sporting Goods, last week became the latest exec to assert the notion that retailers are cannibalizing their own brick & mortar sales when they pump up their online sales efforts.
Asked by an analyst on his company’s fourth-quarter conference call about e-commerce, the CEO noted that the chain’s online sales remain “not material” and that its model is centered on “the convenience of our stores.”
The goal is to make e-commerce not only “accretive” to the business with “modest” investments but “not one that cannibalizes” sales at its physical stores.
Said Mr. Miller, “It is certainly not lost on us that much of the retail world has been struggling with, I guess, the omnichannel-current debt — investing huge sums of money and at the end of the day seemingly just transferring sales from stores to e-com at less profit. We believe as retailers shut doors we’re going to be there for the customers who appreciate our convenience.”
The risk of cannibalization was heard in the early days of e-commerce until online selling took off. Cannibalization chatter appears to be making a comeback as online gains accelerate, in-store traffic declines and store closings become epidemic.
Neil Saunders, managing director of GlobalData Retail, told The Seattle Times that Nordstrom’s holiday struggles were partly due to shoppers buying online and visiting stores less. He said, “In this sense, Nordstrom is a victim of its own success and needs to explore ways of improving connections between its channels, or of persuading online customers to shop more frequently and to buy more.”
An analysis last year by HRC Advisory found that e-commerce gains had been “chipping away” at sales at physical stores across a number of soft goods channels since 2011. Said Antony Karabus, HRC’s CEO, at the time, “Most retailers haven’t yet figured out how to grow and maintain brick and mortar profitability while trying to keep up with the likes of Amazon in today’s increasingly digital environment.”
After Target reported fourth-quarter store sales were down 3 percent and online sales jumped 30 percent, Jim Cramer on CNBC’s “Squawk on the Street,” exclaimed, “It’s a total cannibalization of itself.”
- Big 5 Sporting Goods Fourth Quarter 2016 Results – Big 5 Sporting Goods
- Big 5 Sporting Goods’ Q4 2016 Earnings Call Transcript – Seeking Alpha
- Nordstrom’s results highlight ‘a company of two halves’ – The Seattle Times
- E-commerce is Chipping Away at Brick and Mortar Sales – HRC Advisory
- Study: E-commerce is eroding retail profitability – RetailWire
DISCUSSION QUESTIONS: Is online’s cannibalization of in-store sales becoming a bigger problem? Are retailers with a major physical presence making the right adjustments?