OXFORD, England, October 22, 2018 /PRNewswire/ --
A new report from Clothesource argues that the 2017 losses that tipped Sears into its bankruptcy filing were about the same as Amazon's losses on European retail alone.
Sears lost $981mn in 2017. Much the same as the $988 mn loss at Amazon's European retail holding company, Amazon EU SARL, according to accounts recently filed at London's Companies House.
In fact, with online accounting for just 8.9% of US retail in 2017, "The effect of Amazon, or any other online retailer, on Sears is widely over-rated," says Mike Flanagan, CEO of Clothesource, an Oxford-based apparel industry consultancy.
Though the US Census Bureau shows that online retail went on to grow 15% in the first half of 2018, physical stores still accounted for three quarters of America's retail growth. Sales through physical stores have grown every year since the 2008 recession.
Sears was struggling to adapt to a changing world before e-commerce was invented, and it did no better after e-commerce came along. But well run physical retailers are prospering: the biggest clothing specialists on either side of the Atlantic (Inditex and TJX) get almost all their sales from physical stores - and they've just upped their sales and profit forecasts.
Sales through physical stores have kept growing in the UK as well, Britain's Office of National Statistics reports.
E-commerce doesn't just sell less than people think: it costs more than people expected. Broker Credit Suisse now says that for selling clothes 'not being online is an advantage'.
Primark makes more profit than any other UK clothes retailer - because it doesn't sell online, not despite it. But it's brilliant at using the web for talking to its customers, Credit Suisse adds. 'Primark's social media engagement is best in class', it says, compared to H&M, Inditex, ASOS, Zalando and Boohoo.
TJX Cos and Ross Stores, America's most profitable clothes shops, scarcely sell anything online either. Clothesource's new report, ' The Emperors' Clothes', shows how many other myths abound.
Physical stores aren't disappearing: in the US, consultancy Coresight revealed that in 2018 up to October 19, 70% more stores opened than closed. In the UK, by early 2018, the country's tax collectors reported 2% more shops than in 2017 - and 8% more than in 2007
In both Britain and the US, more people are working in retail today than a decade ago.
So the problem's not about inevitable shifts in consumer purchasing: the main problem lies with many retailers' management says Flanagan. Too many have lost touch with their customers: "Clothes stores keep aiming at millennials - broke, indebted and in precarious jobs - when most clothes spending comes from the middle-aged" he adds. "They're selling fashion when their customers just want stylish clothes that fit properly."
Worse: "Retail used to be synonymous with frugality. But retailers have spent fortunes on new physical stores: worldwide, the ten major clothing specialists have three times more branches than in 2000".
The 'Emperors' Clothes' report looks at twelve areas where underperformers can learn from the successful: examples of both abound in both physical and online retailing
Worst of all, though, is that online specialists like Amazon, buoyed by seemingly limitless ability to raise money and chasing sales growth, seem to be selling below cost. This drags the whole industry into a downward spiral of price-cutting and vanishing margins.
But successful retailers have fought this. The 'Emperors' Clothes' report shows how.
We help the global garment community improve their production and sourcing. http://www.clothesource.net
Amazon EU accounts
The ' Emperors' Clothes' report. A free copy is available to bona fide journalists. Contact Mike at [email protected]
CEO Clothesource Ltd
Park St, Charlbury, Oxford OX7 3PS
Email: [email protected]