Online retail sales continue to skyrocket. Meanwhile, many
brick-and-mortar retailer stores are laying off employees.
Like other traditional brick-and-mortar retailers,Wal-Mart
) competes with the shop-from-anywhere convenience thatAmazon.com
) and other online retailers offer, as well as perks like free
two-day shipping on nearly all products plus free streaming of
music and tens of thousands of movies and TV shows with Amazon
On the surface, it appears that online retailers have
traditional retailers on the ropes. But the fight is entering a
new round, analysts say, as both online and brick-and-mortar
retailers embrace new technology that's erasing boundaries
In some ways, the effect that online stores are having on
traditional retailers is similar to the offshoring drive that
gained momentum several decades ago as U.S. manufacturers went to
China for low wage costs. That trend reduced the number of
manufacturing jobs in America.
Likewise, the trend to online retail is having a major impact
on the U.S. economy by cutting jobs. Retail Metrics President Ken
Perkins says that it's hard to come by accurate hard data on
exactly how many jobs are lost as a result of retail store
layoffs and store closings, but more jobs are being lost than
"I don't think many traditional retail CEOs would say
publicly, 'Amazon is eating our lunch,' " Perkins told IBD. "But
they (traditional retailers) are not hiring anywhere near the
number of people needed to offset the store closings we've
Among stores that had net fewer stores at the end of 2015 vs.
the end of 2014, auto parts chainAdvance Auto Parts (
) reported a net change of 160 fewer stores, according to Retail
Metrics data compiled from company reports.
Office Depot (
) shed 181 stores.Walgreens Boots Alliance (
), which completed the Walgreen and Boots Alliance merger at the
end of 2014, had a net loss of 57 stores in 2015 as it merged the
companies. Leather goods retailerCoach (COH) lost 45 stores, and
struggling women's apparel retailerBebe Stores (BEBE) was down
net 60 stores, among others.
The outlook for retail employment is cloudy. Cowen & Co.
analyst Oliver Chen said that total U.S. retail sales, both
online and in-store, currently are good but not great.
"Retail sales aren't getting exuberant type of growth," Chen
said. The outlook is better for spending by middle to lower-end
consumers, who benefit more from lower unemployment and cheap
gas, he said. But high earners saw their stock portfolios plunge
in early 2016, which could curb their retail spending for
"There is disruption happening. The power has shifted to
consumers," as online and old-line retailers battle for
consumers' dollars, Chen said.
Malls Are Much Emptier
Wal-Mart, with more than $482 billion in revenue last year,
said on Jan. 15 that it was closing 269 stores globally. But the
retail giant said in the same report that it "will continue to
invest in its future," including opening roughly 154 new stores
in the U.S. and 200 to 240 internationally in 2016, likely giving
it a net gain in stores this year.
Wal-Mart President and CEO C. Douglas McMillon told analysts
on the company's fourth-quarter earnings call on Feb. 18, "We're
improving our stores, adding critical capabilities and deepening
our digital relationships with customers as we work to become the
first to deliver a seamless shopping experience at scale."
Meanwhile, online retail pioneers such aseBay (EBAY) and
Amazon are expanding into adjacent markets that often overlap
traditional stores. Amazon has been expanding home grocery
delivery via its AmazonFresh service, competing with No. 1 U.S.
supermarket chainKroger (KR) as well as Wal-Mart andTarget (TGT),
which have expanded grocery offerings in recent years.
In February of this year, Amazon reportedly quietly rolled out
its own private label fashion apparel. It ramps up competition
with highly rated apparel retailers likeMichael Kors
(KORS),Francesca's (FRAN) andRoss Stores (ROST), whose stock is
on the IBD Leaderboard list of top-rated stocks. Women's Wear
Daily has cited KeyBanc Capital data in saying that Amazon has
introduced at least seven private label fashion brands with about
Technology is driving the integration of online and
brick-and-mortar retail, according to John Challenger, president
of outplacement firm Challenger, Gray & Christmas.
"Malls today are much emptier," Challenger said in an IBD
interview. "There is no question (traditional) retailers are
trying hard to figure out how to draw people to stores. Just like
movie theaters are trying to figure out how to bring people in
rather than watch movies on TV," with offerings like
Among the trends at work are mobile shopping via smartphones
and tablets, and the rise of "destination" malls that feature spa
services, movie theaters, fine restaurants and kiosks that sell
autos, he said.
More people are shopping with smartphone apps, both in stores
and online. They shop and buy goods at home or on the road with
their phone. They search for prices and coupons while in stores,
including checking competitors' prices for items they want.
U.S. Bureau of Labor Statistics data show that total retail
employment (online and in-store) in 2015 for the first time rose
above the pre-recession high-water mark of 15.57 million set in
2007, climbing to 15.75 million.
But the National Retail Federation in its annual forecast
released on Feb. 10 said that it expects retail sales employment
gains of about 190,000 on a monthly average this year, down from
2015's high point.
A Feb. 12 Commerce Department retail sales report highlights
the dilemma that traditional retailers face. Total retail sales
grew 3.4% in 2015 to $449.9 billion. But the bulk of growth was
in the "nonstore retailers" category -- mainly online shopping,
which jumped 10.5% for the year to $36.2 billion.
The U.S. retail market is attracting global competition, too.
"The transition to online shopping and globalization together are
changing how our workforce operates and the skills needed. New
technology sets the foundation for new jobs," Challenger
A recent retail immigrant is Dublin-based fashion retailer
Primark, which opened its first U.S. store in Boston in
September. It recently added another store in New York City and
plans to expand in other cities in Massachusetts, Pennsylvania,
Connecticut and New Jersey.
But the mature and competitive U.S. retail market is a tough
nut to crack. China-basedAlibaba Group Holdings (BABA) launched
11Main.com, a retail site for U.S. markets, in June 2014. After
making little headway, it sold the site to privately-held online
marketplace operator OpenSky a year later (but also took a 37.5%
stake in OpenSky). Alibaba has since said little about
approaching U.S. markets, but in February it announced that it
had taken a 5.6% stake (33 million shares) in online deals
Some U.S. traditional retailers are expanding their stores.
Decorative hardware, bathware, furniture and lighting
retailerRestoration Hardware (RH), for example, has traditionally
operated stores of 6,000 to 8,000 square feet. Now it's in the
process of opening superstores with up to 50,000 square feet of
space in major markets, which will boost its hiring.
U.S. Retail In 2020
PricewaterhouseCoopers recently released "Total Retail 2016,"
a study identifying economic drivers that could reshape the U.S.
retail landscape. The market tracker surveyed consumers, who said
that ease of checkout and informed store associates were the top
things they want in brick-and-mortar retailers.
Steve Barr, PricewaterhouseCoopers' U.S. retail and consumer
sector analyst, told IBD that thanks to recent developments, "The
retail store is not dead. There is a unique opportunity for
leading retailers to engage with consumers whenever and wherever
they like to shop."
"As stores transform into enhanced experiences, there is a
real need for employees to take care of customers. There will be
a meaningful shift in jobs," Barr said.
Retail Metrics' Perkins said that the overall picture for
retailers this year looks good. "Certainly there are some
underlying developments that should boost solid spending this
year. Jobs are good, and gas is selling as low as $1.75 a gallon.
Who would have thought that several years ago?"
Still, Cowen & Co.'s Chen said that for online and
brick-and-mortar retailers, "There are lots of battles to be
fought. And they are happening now."