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Why E-Commerce Won’t Be Retailers’ Saving Grace as the Coronavirus Crisis Decimates Physical Stores

In the wake of mass store closures, experts have pointed to e-commerce as a potential lifeline for brands and retailers struggling to maintain their bottom lines. But as the novel coronavirus decimates the U.S. economy and creates widespread health anxiety, a spike in online fashion sales remains to be seen.

The reason is probably obvious: People are saving their dollars for discretionary items.

After all, over the past two weeks, more than 10 million Americans have filed jobless claims, and experts have forecast that the unemployment rate may reach over 30%. The Dow Jones Industrial Average had its worst first quarter ever. Further, there is considerable uncertainty surrounding the coronavirus situation, with some experts indicating the pandemic will last at least through the summer.

“Anything that is nondiscretionary is going by the wayside,” Farla Efros, president of HRC Retail Advisory, explained. “At the end of the day, I’m even looking at my own purchases and anything that is not necessary. [I’m] pushing off … any and all purchases except for, frankly, food and basic needs.”

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According to Adobe Analytics data, overall retail sales jumped 25% from March 13 to March 15, compared to the baseline period of March 1 to March 11. Meanwhile, the “average online apparel store” saw a 13% drop in sales from March 12 through March 25, compared with a Feb. 1 through March 10 baseline.

Still, with people stuck at home, Efros said, athleisure brands may be in the position to do “quite well.” But with social distancing guidelines in place at least through the end of the month, people just don’t have a need for certain items — like high heels or golf shoes — right now.

And for companies that had focused their efforts predominantly on brick-and-mortar before the coronavirus pandemic began, such as off-price retailers TJX Companies Inc. and Burlington, ramping up online operations is easier said than done. Burlington even announced plans early this month to exit its online business.

“I think [retailers are] trying to play a bit of catchup in fast track,” Efros explained. “Setting up the e-commerce [is] quite complicated, and [companies] don’t have the systems and tools to make all the necessary requirements that are needed. It’s not like they could just go, ‘OK. Let’s flip the switch on.’ “

One company that might seem positioned to pick up a chunk of brick-and-mortar fashion sales is Amazon. But the e-tail behemoth has delayed shipping for nonessential items due to increased demand for groceries and other household needs. Even Prime members, who typically enjoy free next-day or two-day shipping, are subject to these delays.

Many traditional retailers, meanwhile, are throwing their efforts behind e-commerce  as brick-and-mortar closures extend into April. And many are already saying they believe that e-commerce gains won’t replace physical store sales. In fact, several companies have announced mass furloughs, including JCPenney, Gap Inc., Kohl’s  and Neiman Marcus. Macy’s is putting more than 100,000 workers on unpaid leave, and the department store chain says the “majority” of its sales have been lost amidst coronavirus-induced closures, despite e-commerce operations continuing.

Efros predicts that, as stores remain closed, furloughs won’t be where it ends for some companies.

 “I do think that you’re going to see more retailers [file for] bankruptcy,” she said. “I think the ones that have a very healthy balance sheet, they’re going to be OK. But at some point, they’re still going to have to take some reductions of cost and probably furlough employees also because it’s just a matter of time.”

A brand like Nike, for which stores are more about “brick-and-mortar awareness and building brand” will be fine, noted James Thomson, partner with Buy Box Experts and former business head of Amazon Services. But retailers that make most of their revenue through brick-and-mortar operations may be in trouble, he noted. And for some companies that are already limping along, the coronavirus impact might speed up a restructuring process.

“If I’m an executive of a retailer that’s slowly dying, in some ways this is a blessing in disguise. It allows me to make big cuts quickly,” he explained. “And if I have to close half my stores or have to lay off, and keep laid off, more than half my employees, I can do that without there being a lot of negative PR [because of the coronavirus crisis].”

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