Dr. Beth Davis-Sramek of Auburn University’s Harbert College of Business recently offered insight into the closure of Sears stores and how brick and mortar stores need to develop omnichannel capabilities. Here’s what she had to say:
Q: Sears will still have 500 stores. Do you expect more Sears stores to close?
A: Yes. Sears did invest in omnichannel capabilities in 2015, but by then it was really too late. They got hit hard by the recession, and when they invested in online capabilities, they were so cash-strapped they did so at the expense of investing in their stores. Sears shoppers were older and did not do online shopping, so that investment did not make sense unless the company could also attract a younger shopper. Clearly, with the Amazons and Walmarts and Home Depots, they couldn’t. They just couldn’t revive the brand for a younger generation. Ask a millennial if they ever walked into a Sears, and they would say, “Why would I do that? That’s where my grandparents shop.”
Q: Will brick and mortar stores be able to survive the era of Amazon and online shopping?
A: Yes. Because the brick and mortar, if you look at what the brick and mortar are doing, they are putting online platforms together so they can compete with Amazon. A lot of what we’re seeing now is – what brick and mortar stores have that Amazon does not have – they already have a physical footprint. We are seeing more and more brick and mortar retailers using the back of the store as their distribution center to move products to do last-mile delivery. We’re seeing a huge number of innovations in the brick and mortar space to compete with the Amazons … and they will.
Q: What is the key to survival for brick and mortar stores?
A: It is developing their omnichannel capabilities so that they can provide the same level of service that Amazon does. It’s the convenience. It’s the click-order. It shows up at my door. That’s why you buy from Amazon. So, the retailers that can offer that same level of convenience, they will be able to keep pace with Amazon. The question has got to be at some point is … is this profitable? Can anybody do this profitably?
Q: What type of stores are most likely to succeed?
A: One of two things, and it goes back to the nature of strategy of competitive advantage. The stores that are going to succeed are going to be the low-cost retailers. The Aldis, the Walmarts, the Dollar Generals. They serve a particular demographic of the population and people shop there for low prices. Then the other is going to be those that can differentiate themselves, and they can differentiate themselves in a number of ways. They can do this by brand. You’ve got a strong brand name – a trusted brand. It’s an automatic draw, so the more that you can create customer loyalty around a brand then they are going to succeed. Your companies that differentiate themselves based on innovation, they are going to succeed. And, of course, you have the Amazons who differentiate themselves by service and convenience. It’s either going to be low-cost or differentiation. And there are a lot of brands like Sears that don’t do any of those things well. They are going to be the ones that dry up.
About Dr. Beth Davis-Sramek
Dr. Beth Davis-Sramek serves as the Gayle Parks Forehand Associate Professor in Supply Chain Management in Auburn University’s Harbert College of Business. Her research has been published in leading academic outlets such as the Journal of Business Logistics, Journal of Supply Chain Management, Journal of Operations Management, Journal of the Academy of Marketing Science, International Journal of Physical Distribution and Logistics Management and International Journal of Logistics Management. She has served as an associate editor for both the Journal of Business Logistics and Journal of Supply Chain Management.
Davis-Sramek and colleagues in Auburn’s Center for Supply Chain Innovation recently released their 8th annual “State of the Retail Supply Chain Report,” which examines industry trends pertaining to such areas as disruptive technology, sustainability and omnichannel fulfillment.