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In-Store and Online Challenges Result in More Questions than Answers

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Initial reports for brick-and-mortar from the Thanksgiving weekend haven’t been that promising. Many shoppers have been making their holiday purchases online prior to Thanksgiving.

Retail observers say many of those online purchases are coming at the expense of trips to physical stores, costing merchants more in shipping and depriving them of the impulse sales they often make to shoppers wandering their aisles.

 In fact, online sales for Black Friday rose 21.5 percent from a year ago, with smartphones accounting for 44.7 percent of all online traffic, according to IBM Commerce. Smartphone shoppers spent an average of $121.06 per order, up 4.3 percent from a year ago.

While online sales have definitely increased, there are chinks in that system, as proven when Wal-Mart and Neiman Marcus websites suffered setbacks during the Black Friday shopping frenzy. Wal-Mart’s website was overloaded with demand, which slowed online checkout for some shoppers. Many Wal-Mart shoppers went on Twitter to complain about problems checking out on the retailer’s website, leading to a string of apologies from Wal-Mart’s official Twitter account.

Neiman Marcus’ online services were unavailable Friday, as frustrated users received a “we’ll be back soon” message.

When retailers with websites (which account for all the major players) have an “off day” with their online operations, it reflects poorly on their brand. But some retailers are capitalizing on their online success and bolstering their behind-the-scenes in-store performance.

With online spending at an all-time high, Target is making sure its store operations are in sync with their website demands. With Amazon as the behemoth to beat, retailers realized there is a need to cut down on delivery time and shipping costs and to put inventory sitting in the store to better use by using it to fulfill orders coming from their websites.

Target CEO Brian Cornell indicated that rather than heavily investing in dozens of additional online shipping centers, shipping from the store is a more efficient way to get orders to customers.

The challenge of managing the logistics of selling online for brick and mortar involves hundreds of stores that must house the necessary inventory, then be staffed with thousands of employees to implement the shipping process. Additionally, there is a layer of online fulfillment centers.

Retailers face additional margin pressures from shoppers, who don’t want to pay shipping fees. Best Buy and Target have eliminated shipping charges on all orders for the holidays, and Wal-Mart requires a $50 minimum purchase for free shipping.

Retail employment is expanding from the floor to the shipping area and fulfillment centers. Target is shipping items from 462 stores nationwide; 44 stores have ramped up shipping operations with expanded backrooms for packing up to 1,500 orders a day.

But some stores like Target aren’t shipping some of their most promoted items like big TV’s or camera-outfitted drones. Those products are reserved for in-store shoppers.

While some items are available online, there are still shoppers who enjoy the thrill of being first in line during Black Friday shopping. The Wall Street Journal interviewed Rafael Gonzalez, a New Jersey resident, who knew that the TV he wanted was also available online earlier in the day, but he decided to wait in line. “I usually come to get first dibs on the cheap items,” Mr. Gonzalez says. “It’s also the excitement.” Mr. Gonzalez estimated he and his wife would spend around $900 in stores Thursday.

Whether it’s increased business and staffing beyond the selling floor, or situations like lagging website operations, brick-and-mortar players should have hope that with shoppers coming to pick up online-ordered items, they can generate foot traffic and encourage a positive in-store experience, bringing in more sales.

TAGS: retail, retail trends, retailers, holiday sales,
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