The recent purchase by Bed Bath & Beyond of One Kings Lane has me thinking about how we are addressing the future of retailing. Bed Bath & Beyond had to purchase a company simply because the cost to establish itself to aggressively sell online would be way more expensive than buying one with an established online presence. One Kings Lane had lost a huge percent of its 2014 value. At one time, they were worth $914 billion. I heard they are worth south of $230 million and maybe less than $150 million.
UPDATE...One Kings Lane Was Sold For Only $30MM
I believe the costs to maintain and grow far outweighed its ability to be profitable in this ever-increasing wave of online retailers.
Online shopping is most often cited as the major problem for brick-and-mortar retail stores. Online sales now account for about 13% of all retail sales and are expected to grow to more than 30% in the next few years.
“Our business is rapidly evolving in response to changes in the way customers are shopping across stores, desktops, tablets, and smartphones,” said Terry Lundgren, Macy’s CEO. “We must continue to invest in our business to focus on where the customer is headed.” The fact is that consumers are “headed to” shopping and buying online.
In my opinion, this is an indicator that all retailers MUST be aware of and change now. If the Big Guys are feeling the heat, what’s a smaller retailer to do?
Just take a look at some of the data: Macy’s, JCPenney and many more are closing stores across the country, and Macy’s is projecting a 3.5% to 4.5% sales decline in its earnings call. JCP is laying off more than 2,500 workers.
The major problem for these brick-and-mortar retailers is they didn’t adapt to “online” years ago as it was trending. Much like our industry, they believe you have to “sit in it, feel it, try it on,” etc.
The One Kings Lane purchase is just the beginning of online retail consolidation. The costs to create an online platform, along with the maintenance and the cost of AdWords/digital advertising, has caused many online not to be profitable no matter what their sales are.
In April, Jerry Epperson wrote:
“The world of home furnishings Internet sales has taken hits recently, as a couple of the larger pure Internet retailers’ financial results have been revealed. Despite years of ramping up products, systems and brand development the losses continue to be staggering even on hundreds of millions in sales. Their private equity partners appear to be losing patience.For furniture, not accessories and décor, the best Internet sites appear to be tied to traditional stores that give the websites credibility and provide comfort to consumers. ... Returns continue to be the largest challenge for Internet furniture retailers
”How long can companies survive without a profit? They sell millions and lose millions. Personally, I wouldn’t want to be the guy that keeps being asked to give someone money over and over and not see a profit.
This is no longer a fad, and if our industry doesn’t adapt, we will continue to lose our independent retailers to those that embrace the online consumer.
One more prediction:
about bill napier
Bill Napier has been in the Marketing Industry for over 35 years and is currently the Managing Partner at Napier Marketing Group, Inc.