Department Stores’ Pains Eased In Q2, But Challenges Are Digging In

This past week’s earnings results for Macy’s and Kohl’s were brighter than expected, but that doesn’t mean troubles afflicting major retailers are fading.

As eMarketer pointed out on Thursday, Macy’s same-store sales slipped 2.8 percent — the 10th consecutive quarterly drop.

Meanwhile, Kohl’s same-store sales were essentially flat, falling 0.4 percent year-over-year, continuing a dynamic that was seen for the past five quarters.

Even Nordstrom’s reversal was fairly meager, as it delivered a same-store sales gain of 1.7 percent.

On Friday, JCPenney posted a 1.3 percent declines in same-store sales, a bit worse than the expected fall of 1.2 percent.

The retailer, like its rivals, have been aggressively pursuing in-store omnichannel strategies designed to combat online showrooming, even as it and other major store brands shrink the number of locations they have.

For JCPenney, it did point to some bright spots in its home, fine jewelry, footwear and handbag, and Sephora beauty units.

“The company has gained customers across these segments — including younger shoppers who might previously have shunned JCP,” GlobalData Retail’s Saunders told CNBC about JCPenney’s focus on the home, footwear, and fashion categories.

Looking at how broader shifts away from malls and other big boxes have seen a retreat in foot traffic, eMarketer, citing RetailNext data, says that through July, sales and traffic at US brick-and-mortar stores have declined each month since at least January 2014. Both Macy’s sand Kohl’s, for instance, said on Thursday Q2 traffic declined.

“Department stores themselves also have failed to keep up with fast fashion rivals like Zara,” eMarketer says. “They also have shot themselves in the foot with frequent promotions and one-day sales.”

Some observers find that omnichannel moves, such as advancement of mobile-based loyalty programs, are unlikely to reverse the trajectory of department stores’ dwindling fortunes.

“It’s all band-aid stuff, said Mark Cohen of Columbia Business School in an interview with eMarketer. “The slope of the curve of their performance continues to point downward. The slope may be abating a bit, but not turning up. Macy’s is the poster child of the whole sector. The department store genre is in decline.”

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Over 80 Percent Of Millennials Want In-App, In-Store Payments

Approximately 80 percent of Millennials are interested in taking checkout into their own hands with scan-and-go payments, scanning products in-store and then paying via an app, according to an eMarketer report based on research from Acosta — but only three percent of retailers have up-to-date “checkout and payment for a customer’s own device” in place.

Millennial and Gen-Z shoppers haven’t completely turned their backs on “traditional” in-store commerce. But this growing disconnect could prove a serious issue for retailers at a time when many long-standing brick-and-mortars are struggling to drive foot traffic.

After all, smartphones “increasingly factor into the retail experience, and younger people are leading in usage,” the report states. “The Acosta data is consistent with findings that the majority of millennials would pay for purchases in-store using an app.”

POS Investment

Approximately 82 percent of Millennials believe it’s important for a brand to have physical stores, and statistics like this indicate that younger shoppers still desire the unique experience that brick-and-mortars can offer. But the friction caused by long checkout lines or understaffed retail flagships is more of a turn off than ever; after all, with same-day on-demand delivery expectations, it’s a rare consumer who will put up with an excessive wait.

As such, it pays for retailers to invest in updated POS checkout lane technologies now — whether that means accepting a wider range of mobile payments and/or enabling scan-and-go in app payment.

Plenty have wondered if the “tipping point” for contactless pay has actually arrived, but Acosta’s research indicates that the appetite is certainly there — and that 80 percent of Millennials interested in scan-and-go payments could represent up to $160 billion in purchasing power.

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Back-To-School Retail Sales Will Reach $857.18 Billion This Year

Too soon to think about back-to-school? Not for U.S. retailers: In the months of July and August, back-to-school shopping season sales will reach $857.18 billion — a 4 percent increase over 2016’s record-setting year, according to a report from eMarketer.

Five key categories will see a significant spending uptick this summer, per eMarketers analysis: Apparel and accessories, books and music, computers/consumer electronics, office equipment, and toys/sporting goods. In other words, it’s time for marketers in these categories to start thinking about promotions and experiences that will drive back-to-school related sales — even though September is still three months away.

However, as estimated back-to-school spending has grown since last year, the retail footprint has shrunk — meaning that online (both desktop and mobile) will play an even more critical role in driving both e-commerce and the physical sales that still occur.

This trend became clear in 2016, when approximately 85 percent of 1,000 parents told Retale said they use a smartphone to aid back-to-school shopping.

“The use of mobile to help with back-to-school shopping has risen nearly 10 percentage points year-over-year, according to our data,” Pat Dermody, President of Retale, told GeoMarketing at the time. “It’s clear that the omnichannel customer journey continues to define the way most people approach their purchases, and people continue to discover the advantages of leveraging mobile in their shopping.”

As such, marketers would do well to keep in mind three major factors influencing the mobile parents who are actually paying for the bulk of back-to-school purchases:

  • YouTube Matters: It’s not just for Gen-Z — both Millennial moms and dads are heavy users of the platform. In fact, 86 percent of all Millennial dads watch YouTube videos for guidance on parenting topics from cooking a meal to finding back-to-school products for their kids.
  • Video Ad Uptick: Whether on YouTube or not, video ad consumption is on the rise for both kids and parents. As such, “video is not a nice-to-have — it is a must-have,” Facebook’s Irene Chen explained in a panel discussion earlier this year. Just make sure that the video makes sense without sound or uses subtitles; plenty of users watch on the go in situations where it isn’t appropriate to have the volume up.
  • Intelligent Search Changes Everything: For every online purchase resulting from a search, Google sees multi-channel retailers receive an additional 400 in-store visits — a statistic that reinforces how crucial search is to brick-and-mortar businesses. But search has changed since the (relatively recent) days in which a query would result in a list of webpages. As such, to show up in the “knowledge graph,” businesses need to think about the entities fundamental to their category — like how to rank for unbranded search terms (“notebooks for back-to-school” as opposed to “Office Max,” for example), and where their customers are. Do they search on Google? Do they use Snapchat, or are they more likely to be on Instagram — or both? Alexa? Are they using Uber? Businesses today need to push their information to all of these digital services; it’s not enough to just put it on the web.

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