We know that eCommerce is taking away from brick-and-mortar sales; a new study has revealed the details on just how big a bite that's becoming.
Yesterday (May 3), the strategic retail advisory firm HRC Advisory released the findings from a study showing that operating earnings from sales have declined by up to 25 percent as a result of a shift from in-store to online.
“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,” Antony Karabus, CEO of HRC Advisory, stated in a press release. “Retailers need to recalibrate and fine-tune their economic business models to reflect today’s new variable cost-oriented online model. Those who can engage customers and meet their heightened expectations, while offering complete visibility of inventory availability, can be lucrative in reducing markdowns and improving inventory productivity.”
The release shares additional findings from the HRC study: The pace of online sales has continued to decelerate since the early days of eCommerce, returns of items purchased online are cutting into retailers' profits, eCommerce volumes are not high enough to validate store closures and price-matching is not necessarily a profitable practice in all cases.
“There are a number of ways retailers can strategically mitigate and ultimately offset the negative impact of eCommerce on their operating earnings and return to their historically higher brick-and-mortar performance,” Karabus went on to state. “To start, retailers need to reexamine the cost structures of their physical stores and infrastructure and become more efficient omnichannel operators to staunch the losses from extremely high online fulfillment costs.”