Amazon's (AMZN) E-Commerce Dominance Claims Yet Another Victim

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Add the name HHGregg, which Bloomberg says will file bankruptcy as early as this week, to the list of casualties Amazon.com's (AMZN) e-commerce dominance has been responsible for. Like former electronic retail giants Radio Shack, Circuit City, Media Play, CompUSA and a host of nostalgic remnants, the list of dead bodies Amazon leaves behind continues to grow.

On February 23, Bloomberg reported that HHGregg, in business since 1955, would seek bankruptcy protection this month amid plummeting sales. At the time, Bloomberg noted that HHGregg, which has lost money in its previous two fiscal years, wanted to avoid Chapter 11 and was in the midst of seeking an out-of-court solution. It would seem these efforts were futile.

On Thursday the Indianapolis-based brick-and-mortar chain, which suffered 24% sales plunge in the holiday quarter, compared to Amazon’s 22% rise, said it would close 88 poor-performing stores (40% of total locations) along with three distribution centers. The company said this was in an effort to improve liquidity and return to profitability. However, bankruptcy also suggests that HHGregg, which recently hired Stifel, Nicolaus & Co. to help with “strategic alternatives,” could find no other way to avoid prolonging the red ink.

"We are strategically exiting markets and stores that are not financially profitable for us," said CEO Robert Riesbeck in a company statement.

Though the company still has some 220 stores, it relies heavily on revenue from those physical locations, unlike Amazon, which in December reported its strongest-ever holiday sales, leading to fourth quarter revenue of $43.7 billion. By contrast, as HHGregg, which has more than 3,700 full-time employees, is on the verge of putting many people out of work, Amazon plans to create more than 100,000 new, full-time, full-benefit jobs in the U.S. over the next 18 months.

The reason? Amazon has long figured out consumers’ spending patterns have changed. The days of brick-and-mortar and the shopping mall experience became limited at the dawn of the internet. And the list of retail victims Amazon can claim extends beyond electronics. Sports Authority and American Apparel are recent examples.

And as for the so-called Amazon effect? It’s more than just a phenomenon. Considering the names that are closing stores but have not filed for bankruptcy like JCPenny (JCP), Macy’s (M) and Sears (SHLD), it’s futile to try to survive in today’s retail without first establishing a strong omni-channel strategy. In that regard, HHGregg failed.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: News Headlines , Technology , Stocks
Referenced Symbols: AMZN , JCP , M , SHLD

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