E-Commerce Is Not the Answer

By Mark Roberti

Selling more online will not solve the problems that brick-and-mortar stores face, but omnichannel retailing might.

I recently received an e-newsletter from Sourcing Journal, a trade publication for apparel and textile executives, and this headline caught my eye: "Could E-Commerce Solve the Store Problem?" Stores have been closing, and here was an article suggesting that the solution for conventional brick-and-mortar retailers might be selling more products online. Indeed, the article's first line says this might be a "panacea" for these companies.

To support this argument, the article states: "Retail brokerage JLL reported department store same store sales fell 4.5% in 2016, while e-commerce picked up 13.3%. According to the National Retail Federation, online and other non-store sales increased 1.3% in July compared to the previous month and rose 11.4% year-over-year. This compared to an overall retail sales gain of 0.6% over June and a 3.5% year-over-year increase."

However, while growing e-commerce sales can help to offset declining store sales in the near term, it is not the answer in the medium or long term for conventional retailers. There are several reasons why I say this. First, if a store maintains separate online and brick-and-mortar channels, its cost structure will forever be a disadvantage when competing against online-only retailers.

Another issue is that having separate inventory for online and store sales means a retailer cannot expose all of its in-store inventory to customers shopping online. It cannot allow customers to buy online and pick up in store (unless shoppers wait a few days for the retailer to ship the goods to a nearby store location, but then they might as well wait for thems to be shipped to their home). And it certainly can't let someone buy on their phone while at the store.

Conventional retailers lack the inventory accuracy required to maintain a single view of their inventory for customers buying online or on their phone. Hence, they might hide items from customers if there are only one or two left at a shopper's local store, because they're afraid the products might not really be in stock and customers may be disappointed upon arriving to pick up an item, only to find it isn't there.

Another problem for conventional retailers is that they lose sales when people shop online. Studies show that customers often pick up additional goods they didn't plan to buy when they visit a store. If conventional retailers don't fix the issue with their stores, then they risk losing sales in the long term as their suppliers go directly to consumers. Indeed, the Sourcing Journal article says that VF Corp., a manufacturer of apparel, footwear and accessories, is expected to see direct-to-consumer sales grow by 10 percent this year. Meanwhile, footwear, sports and casual apparel maker Under Armour's direct-to-consumer revenue rose 20 percent, to $386 million, during the most recent quarter.

I don't believe that we are seeing the retail apocalypse so many publications have been writing about. Yes, some retailers are closing stores. Others are opening stores. To me, the growth in online sales is a symptom of the problem in retail, and not the solution. The problem is poor inventory accuracy, which leads to customers not finding what they want when they want it.

The solution? It starts with better in-store inventory accuracy, which enables retailers to let consumers buy online and pick up in-store, as well as buy on their phone while at the store. It also allows retailers to ship from store. Perhaps most importantly, it enables them to innovate and provide a better in-store shopping experience.

If you are a retailer and want to understand how RFID technology can boost in-store inventory accuracy and enable true omnichannel retailing, you should plan to attend RFID in Retail and Apparel, being held on Sept. 25 in New York City. I hope to see you there next week.

Mark Roberti is the founder and editor of RFID Journal. If you would like to comment on this article, click on the link below. To read more of Mark's opinions, visit the RFID Journal Blog, the Editor's Note archive or RFID Connect.