Nov 04
The closure, bankruptcy or downsizing of several national, big box retailers has driven home the importance of retailers maintaining strong online and brick-and-mortar presences. And a recent report from FTI Consulting attempts to identify the overall cause behind the national retail market’s current dip.
Houston’s retail market is as strong as it has ever been, but U.S. retail is suffering from declining sales, fewer shoppers going to malls and more, according to the report. The trend has affected some of the nation’s largest retailers. In March, sporting goods retailer Sports Authority filed Chapter 11 bankruptcy protection and will move forward with plans to auction off 87 of its leases, including all 11 in the Houston area. And Pacific Sunwear of California Inc. filed for Chapter 11 bankruptcy protection in April, but the filing shouldn’t immediately affect Anaheim-based PacSun(Nasdaq: PSUN) retail stores.
The report also highlights the importance of retailers selling on an omnichannel basis, or online and in-store. Online sales will grow at a double-digit percentage rate year-over-year, compared to in-store sales growing at a rate of two to three percent year-over-year, according to the report.
“Everyone’s new buzzword is omnichannel,” said Kenneth Katz of Houston-based Baker Katz, but it’s worth considering that online sales are growing from a lower base quantity, he said. For the next few years, online sales will post larger growth percentages than in-store sales, partly because online sales still have so much more room to grow.
“The reality is that years ago, there were some people predicting the end of brick and mortar and some declaring internet sales to be a fad,” Katz said. “I think the passage of time has proven both those groups to be wrong.”
It’s tough to say where Houston stands in terms of its innovativeness in the retail sphere. Katz predicted that markets with an older population will see a transition more slowly to omnichannel retailers. Retailers in markets with more young residents will need to adopt an omnichannel way of business faster, Katz said, because those shoppers are faster to adopt online commerce as their main form of shopping.
Katz estimated that Houston’s probably in the middle of the road, in terms of its consumers’ willingness to adopt both online and in-store shopping. That doesn’t excuse local shops from having to soon developer a web presence, he said.
“It’s so difficult to attribute a retailers’ shutting down only to Internet-based commerce,” Katz said. “The reality is that there are multiple factors contributing to a retailer’s desire – or being forced – to shut down stores.”
Original article can be viewed here.