In a new report by Antony Karabus of HRC Retail Advisory, it was found that “traditional retail economic metrics” are not sustainable in the face of rapidly changing online retail.
The report demonstrated that online sales growth for traditional retailers has slowed, while Amazon’s market share has continued to expand rapidly. Per the report, the shifting retail landscape is making it more difficult for traditional retailers to have both online and brick and mortar retail and remain sustainable.
HRC’s report also found that online sales for specialty chains and department stores grew by 9 percent and 19 percent respectively during 2015. That is a significant decrease from the 12 percent and 29 percent compound annual growth rate growth of recent years.
On the other hand, Amazon’s growth rate of merchandise sales has increased by 32 percent this year, and 31 percent last year. Amazon’s merchandise growth rate is about three times that of the brick and mortar chain’s online growth rate, and is illustrative of the increase of market share that amazon is gaining.
“This is a challenging time for brick and mortar retailers as they work hard to profitably compete against digital pure-plays, while concurrently managing their brick and mortar profitability,” said HRC Retail Advisory CEO Antony Karabus in the report. “Very high fulfillment costs, free shipping and returns, and the challenging issues of refurbishing and getting returned product into a re-saleable state and location can add a substantial two percentage points or more to a retailer’s cost structure. Retailers must take action now to address these issues, which are not economically sustainable.”