Migration Of Shoppers Away From Physical Stores Continues

Call it the efficiency effect, but shoppers are making an increasingly large number of their purchases outside of physical stores—or at the very least, not making those purchases directly through those stores, such as going into a store to see an item and then purchasing it online while standing in the aisle. The fact that non-physical purchases are rising is not news to anyone in payments or retail. But the speed of the migration—and that it’s not slowing down as we approach the 20^th anniversary for mainstream eCommerce—is rather alarming.

“U.S. retailers are facing a steep and persistent drop in store traffic, which is weighing on sales and prompting chains to slow store openings as shoppers make more of their purchases online,” The Wall Street Journal reported on Tuesday (Aug. 5).

The reason it’s an efficiency effect is that these shoppers are not fleeing physical stores per se. They are simply using eCommerce and mobile to make as many purchases as easy, efficient and convenient as possible. They are not abandoning stores as there are still many products that stores handle best. Refrigerators and ovens are hardly burning up Amazon, and clothing sales, although suffering declines, are still an in-store favorite given the tactual and fit issues. Then there is the immediacy factor, something that even same-day delivery efforts – which are still in their infancy – do not deliver.

The problem is that mobile, eCommerce and shoppers are all becoming far more efficient than retailers had planned on. And that means store closings. The Journal quoted Staples CEO Ronald Sargent saying that stores now “have to earn the right to stay open,” something that he said he expects “hundreds of physical locations over the next two years” to fail to adequately do. RadioShack plans to close 200 stores this year and Sears closed another 80 stores this year, the Journal said.

But RadioShack and Sears are struggling brands. What about the healthier chains? Walmart is feeling the in-store pain, but is fighting back by trying to make its online arm a supporter—rather than a murderer—of in-store sales. Further bucking the trend, Walmart has announced plans to add hundreds of physical stores in the next couple of years.

How bad is the brick-and-mortar traffic bleed? Pretty bad. “Aside from a small uptick in April, shopper visits have fallen by 5 percent or more from a year earlier in every month for the past two years, according to ShopperTrak, a Chicago-based data firm that records store visits for retailers using tracking devices installed at 40,000 U.S. outlets,” the Journal reported. “Even as warmer temperatures replace the harsh winter weather this year, store visits fell by nearly 7 percent in June and nearly 5 percent in July, according to ShopperTrak.”