Peak Shopping Season Performance
U.S. retailers can breathe a sigh of relief. After a gloomy start to 2017 – where store closures and bankruptcy reports dominated the headlines – retailers have turned a corner, coming through the strongest holiday season in years. Their efforts to meticulously plan inventory, customer channels, pricing and staffing in the run up to and during the peak season paid off. According to latest figures from the National Retail Federation, holiday sales rose to $691.9 billion in November and December 2017, marking a 5.5% increase from the previous year.
How a retailer fares in the intense competition over the Christmas period can signal make or break. In recent years it has become increasingly tough for brick-and-mortar stores in particular due to changing consumer behavior and technology innovation. While consumers remain as unpredictable as ever, retailers saw strong in-store and online sales during the Holiday period, despite the structural shifts the industry is currently experiencing. Kohl’s, Target, J.C. Penney and Macy’s all reported increased sales – with many also raising estimates for quarterly earnings, while online sales flourished too reaching a record of $108.2 billion.
Encouraging store footfall
While the strength of the U.S. economy certainly helped spur consumer spending, strategies put in place by retailers helped engage shoppers. To drive footfall, many retailers offered BOPUS (Buy Online Pickup in Store), changing the store make-up and giving consumers added convenience while easing costs at the same time. Target reported that stores fulfilled 70% of its digital volume in November and December 2017.
Accenture’s latest Holiday Shopping study found that over half (52%) of U.S. consumers wanted to take advantage of this service during the Holiday season, and over two-thirds (68%) said they were likely to purchase additional items in store beyond their original purchase if they did.
Despite strong online sales, many etailers experienced operational challenges over Cyber Monday which they looked to resolve ahead of Christmas. According to the 2017 Holiday Shipping study from Kurt Salmon, part of Accenture Strategy, the top challenges etailers faced during this period included:
• The rise of online queues: Record levels of consumer demand saw customers being held in ‘online pens’ before they were able to browse and buy goods, similar to what many experience when purchasing concert or festival tickets. As online destinations reached their maximum customer threshold, queueing systems kicked in earlier than anticipated which impacted customer experience.
• Unrealistic shipping promises and ‘ghosting’: Some retailers tried to lure customers by improving shipping to two days, which was a difficult promise to deliver on such a big shipping day. Some retailers that experienced issues ‘ghosted’ customers by leaving them in the dark and did not communicate when orders would arrive.
• Subtly relaxing delivery speeds: The majority of retailers heard customer demands for free shipping options which 97% offered, compared to 90% in 2016. Over a quarter (27%) relaxed their delivery promises on the actual day though. While the subtle change may not have been noticed by customers, it helped some retailers live up to their shipping promises. The average delivery promise for retailers offering free shipping on Cyber Monday was 6.9 days, compared with 6.3 days on a standard day.
Due to higher than anticipated customer demand on Cyber Monday, the study found that retailers were more cautious at Christmas and consequently, nearly a third (30%) of retailers opted to not provide customers with a ‘guaranteed’ shipping date at all. The majority of etails also moved the average cut-off date for standard delivery back by a day compared to previous years to avoid customer disappointment.
Preparing for peak performance
As U.S. retailers continue to analyse their results over the last period and plan for the next peak season, many will be reconsidering the purpose, and format of their store portfolios, boosting analytics capabilities to gain deeper insights into customer preferences, and bolstering operations and supply chain infrastructure to ensure they can continue meeting increased demand for online orders.
A priority for multi-channel retailers will be to align their ecosystems to survive as etailers continue to grow without the shackles of legacy bricks-and-mortar systems. Doing so will be essential to ensure they capitalise on a continuing trend towards more online sales, and will stand them in good stead for the next peak trading season.
Jill Standish is senior managing director and global retail lead at Accenture; Steve Osburn is managing director at Kurt Salmon, part of Accenture Strategy.
Bon-Ton details turnaround plan
The Bon-Ton Stores is hoping to improve its flagging business with a two-year, four-part turnaround plan.
The plan, which was outlined in a Securities and Exchange Commission filing, is comprehensive and includes assessing the chain’s store portfolio, improving merchandise assortment with more in-demand items, implementing planning and allocation strategies, and improving its marketing. It also includes capital investments in stores. The plan also looks to increase Bon-Ton’s e-commerce penetration, growing to $431 million in 2019 from $283 million in 2017. The restructuring could occur through an out-of-court transaction or through a Chapter 11 filing.
Bon Ton operates 260 stores under such banners as Bon-Ton, Bergner’s, Boston Store, Carson’s, Elder-Beerman, Herberger’s and Younkers. The company previously said it expects to close at least 40 stores in 2018. The turnaround plan puts the number at 42, and potentially three more. It also advised there are at least another 20 stores that should be placed on a “watch list”
Bon-Ton, which is burdened with about $1.1 billion in debt, has been unprofitable for the past six years. It recently entered into a forbearance agreement after missing a deadline for a $14 million debt payment.
“As previously disclosed, Bon-Ton continues to work with our advisers and debtholders to evaluate potential options for the restructuring of the company’s balance sheet and other strategic alternatives,” the company said in a statement. “At the same time, we are also focused on executing the merchandising, marketing, cost reduction and store rationalization initiatives that are part of the comprehensive turnaround plan for the business we outlined in November. We are committed to pursuing the path that we believe is in the best interests of the company and its stakeholders.”
Under the plan, $45 million would need to be raised, possibly from venture capital funds, industry investors or others, with the new investor being given controlling interest in the company, reported the Milwaukee Journal Sentinel.
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Off-price retailer to explore alternatives
Stein Mart is looking at its options in the wake of declining sales.
The retailer announced it has put together a special committee, appointed by the board, that, along with management, will explore all opportunities to improve operating performance and strategic alternatives. Stein Mart did not set a timetable for completion of this process.
“Given the continuing challenges of the retail environment, it is prudent for us to review our strategic options while focusing on ways to improve our business,” stated CEO Hunt Hawkins, CEO, Stein Mart, which operates 293 stores across 31 states.
Stein Mart’s same-store sales fell 6.9% in its third quarter, on top of a 4.6% decline in the year-ago period. Net loss for the period increased to $14.6 million from $11.0 million. On its earnings conference call, management said the retailer was trimming back excess apparel inventory and working to keep a tighter control on expenses.
Stein Mart’s decline comes as other other-price retailers, including TJX Cos. and Ross, are flourishing. The retailer has struggled to bring in national brands and has been less cost-competitive than some of its rivals, according to CNBC.