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E-Commerce: Sales Driver & Margin Killer?

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While top line sales have greatly benefited from e-commerce, the bottom line may be paying the price.

Online sales have been the darlings of otherwise dreary to downright depressing financial reports lately, providing retail execs with a silver linings. For example, Target reported a 4.3% sales decline for Q4, ended Jan. 28, 2017. But comp digital sales increased by 34 percent. Similarly, Express reported a comp store sales decline for the quarter of 13 percent though e-commerce was up 9 percent. In the same period, J.C. Penney reported comp stores were off by 0.7%, while e-commerce improved by double digits.

And it’s true that e-commerce continues to soar. Overall online sales increased to $394.9 billion in 2016, up 15.1% over the previous year, according to the U.S. Census Bureau. The reality though is that online only represents a sliver of total sales, so it can’t compensate for all of those same store shortcomings.

And now, a new report from AlixPartners reveals another inconvenient truth about retailers’ race to catch up with online shoppers: it’s costing them more than they realize.

Read more at Sourcing Journal.

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