Home / Investing / Ecommerce peaks of Most Ever. Brick and mortar melts. Department stores are toasted – Investment Watch

Ecommerce peaks of Most Ever. Brick and mortar melts. Department stores are toasted – Investment Watch

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What is surprising to many people: the growth of electronic commerce is not stabilizing, but is still increasing at a dizzying pace.

By Wolf richter for WOLF STREET.

Retail e-commerce sales increased 16.4% in the fourth quarter of 2019 compared to the previous year (not seasonally adjusted), to $ 187 billion, and reached $ 602 billion for the year, twice as much as it did five years, according to the Department of Commerce. E-commerce retail sales in the fourth quarter were $ 26.4 billion higher that in the fourth quarter of the previous year, the highest dollar gain year after year in the history of electronic commerce, as it continues to gain momentum, instead of losing it:

On a seasonally adjusted basis, e-commerce sales reached $ 154.5 billion in the fourth quarter and accounted for 11.4% of total retail sales. But wait … retail sales include sales at service stations (gasoline, diesel), car dealers and grocery and beverage stores. These three categories have been able to largely resist electronic commerce, and represent 55% of physical retail sales.


But the remaining 45% of physical sales are being crushed and particularly the group of retailers that tend to populate shopping centers, including department stores: "shopping center retailers," as I call them.

E-commerce sales include online sales of traditional retailers, many of which have developed large and thriving online operations. According to eMarketer, these were the top 10 e-commerce retailers in 2019: six of them started as iconic US brick and mortar chains. UU .:

  1. Amazon
  2. eBay
  3. Walmart
  4. Apple
  5. House deposit
  6. Best Buy
  7. Macy & # 39; s
  8. Qurate Retail Group (QVC, HSN, Zulily, Ballard Designs, Frontgate, Garnet Hill and Grandin Road)
  9. Costco
  10. Wayfair (e-commerce furniture retailer)

Walmart received the note late a few years ago.

Walmart is now releasing everything it has in electronic commerce to see what sticks, including acquisitions related to electronic commerce, many of which did not stick. For 2019, it allocated $ 5.2 billion of its capital expenditures to build its electronic commerce infrastructure and technology, more than double what it allocated to spend on new stores and store remodeling ($ 2.5 billion).

In its Fourth quarter earnings report Two days ago, he said that Walmart e-commerce sales in the US UU. they had increased 37% year-over-year and that Sam’s Club e-commerce sales had increased 33%.

But Walmart, having started so late, is sadly left behind. In 2019, it began to disclose its e-commerce sales in dollars in its quarterly presentations to the SEC, but has not yet published it for the fourth quarter. Through the first three quarters of 2019 – So it does not include the great Christmas sales quarter – Walmart e-commerce sales in the US. UU. They increased 40% year-over-year to $ 14 billion. This indicates that your e-commerce sales in the US UU. For fiscal year 2019 they were around $ 21 billion, which would be around 8.5% of its total sales in the US UU..

Other retailers are way ahead of Walmart.

Macy & # 39; s, when it was announced in early February another 125 store closuresIn addition to previous waves of store closures, it also revealed that its e-commerce sales have increased to "more than $ 6 billion per year," to more than 25% of your total sales.

Nordstrom has not yet published its submissions to the SEC for the fourth fiscal quarter, but in its 10-Q for the third quarter, it revealed that e-commerce sales had increased to 34% of total sales, with a 7% increase in e-commerce sales and a 7% drop in physical sales, for a 2% drop in general sales.

Brick and mortar department stores: those who don't want to follow the route of Bon-Ton stores, Sears Holdings, Barney & # 39; sY soon J.C. Penney, among many regional chains, they decided that they should seek salvation in electronic commerce because electronic commerce is ending with department stores one by one and chain by chain.

In the fourth quarter, department store sales fell 6.6% year-over-year to just $ 33.1 billion (seasonally adjusted), having collapsed 43% from its peak in the fourth quarter of 2000 despite two decades of population growth and inflation.

This is the brick and mortar business in which Macy & # 39; s, Nordstrom, J.C. Penney and Sears. It is crazy to think that this can be reversed; The only thing that department stores can do is stop the decline in their stores while trying to migrate their business to e-commerce:

Total retail sales are fine, thanks to electronic commerce.

Including electronic commerce, total retail sales in the fourth quarter increased 3.9% year-over-year to $ 1.39 billion, according to the Commerce Department. revised retail data:

But the "mall stores" are in trouble.

Then, approximately 55% of physical retail sales are made in stores that have been largely resistant to electronic commerce: service stations, car dealers and grocery and beverage stores. But these stores are also now under attack:

  • The very gradual change to electric vehicles, which people can charge at home, reduces sales at service stations.
  • People are already pricing and buying cars online, but they run into state franchise laws that protect new car dealers and face problems in delivering the vehicle and dealing with documents. But these problems are being solved.
  • Americans are gradually warming up to buy fresh groceries online. Many products in supermarkets, such as household items, are already being purchased online.

The remaining 45% of physical sales are made in stores that are under a brutal attack of electronic commerce. In that group, the most vulnerable are the "shopping center stores". They include these categories, with examples of bankrupt chains in brackets:

Combined sales in these "shopping centers stores" reached a maximum in the fourth quarter of 2007 of $ 164 billion and since then have decreased 6.1%, despite 15 years of population growth and inflation and despite an increase 42% of total retail sales (brick and mortar and electronic commerce) during the period. In the fourth quarter of 2019, sales fell 2.2% year-over-year to $ 154 billion, at the place where they had been for the first time in the fourth quarter of 2004, and have now been surpassed by e-commerce sales:

Keep in mind that e-commerce retail sales cover the entire spectrum and are broader than mall stores. But the comparison outlines the trend in the last 20 years.

What surprises many people year after year is that the growth of electronic commerce is not stabilizing in any way, but is still growing at rates ranging between 12% and 17%. The dollar sales base of e-commerce increases every year due to this vertiginous growth: in 2019 it reached $ 602 billion. And sales in dollars increases They are also getting bigger and taking increasingly large bites of brick and mortar.

Consumers direct this show. And they are increasingly changing their purchases to e-commerce for all the amenities it offers, the ease of price comparisons and, often, the lowest prices. This change is a massive structural change in the United States economy. And every time a consumer gets frustrated in a damaged brick and mortar store, out of merchandise, with little staff, and then buy that online, since online you can get anything, the brick and mortar business has run out of another customer, and this structural change takes another step forward.


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