The weekend after Christmas has typically been big business for retailers, as people return gifts — and buy new ones for themselves. But some brick-and-mortar retailers are struggling this holiday season, facing the dual problems of overexpansion and an increasingly demanding consumer base that likes the ability to shop online.
As shoppers embrace the convenience of shopping online, traditional retailers have slashed prices and staged blowout sales in an effort just to get people in the door. Brick-and-mortar stores are trying to compete by offering an experience that can't be matched online.
"Having a special event at the store ... they have coffee bars ... they have couches, TVs. The retailers are trying to sort of make the shopping at their stores into an experience, to give you a reason to visit," says Suzanne Kapner, who covers retail for The Wall Street Journal.
Getting people in the door is especially important this time of year, as sales in the holiday season, from Nov. 1 to Dec. 31, usually account for up to 20 to 40 percent of retailers' annual sales, according to the National Retail Federation.
Meanwhile, brick-and-mortar shops have also embraced e-commerce themselves — like Wal-Mart and Target, two traditional retailers that also make lots of sales online.
But that creates challenges of its own. Staffing these warehouses and distribution centers for online sales requires extra workers, especially during holidays, and employers are having more difficulty filling those jobs in recent years. Wal-Mart and Target have both been building new distribution centers and hiring more people to deal with the increased online demand, according to the Wall Street Journal.
"Retailers are scrambling to find employees to fill their warehouse," Kapner says, "and they've been cutting back on the number of employees on the store floor."
Black Friday, the day after Thanksgiving, has traditionally been the biggest retail shopping day of the year. But data from the National Retail Federation say more than 103 million people shopped online over the Thanksgiving weekend, edging out the fewer than 102 million who said they shopped in brick-and-mortar stores.
The day after Christmas, on the other hand, ranks as the third biggest day of the year for the number of store visits, according to ShopperTrak, a research firm. When ranking for sales, though, Dec. 26 falls to 10th place, far below Black Friday, because of the large number of people entering stores to return items rather than buy them.
As customers move to shop online and have greater ability to shop whenever, wherever, single days like Black Friday are becoming less important, argues Jesse Tron of the International Council of Shopping Centers. "There's an overall dilution when it comes to this entire shopping weekend," Tron told NBC News in November.
"On Black Friday, the crowds at stores were noticeably thinner," says the WSJ's Kapner.
Others argue that Black Friday and that whole weekend are becoming more important — at least online. "Thanksgiving has established itself as one of the more important online buying days, while Black Friday continues to gain in importance online with each passing year," said Gian Fulgoni, in a report from comScore Inc., as reported by Bloomberg.
Sales on Thanksgiving rose 9 percent and sales on Black Friday rose 10 percent among people using desktop computers, according to comScore. And this year's Cyber Monday, the Monday after Thanksgiving, was the biggest ever, with online sales of more than $3 billion, according to the company's report.
Compounding the threat of online business was a too-rapid expansion of retail locations in recent years. Stores like the Gap and Macy's announced closures for dozens of locations in 2015.
"Over the past decade or two you've just seen these chains open dozens and dozens of stores and they've just frankly overexpanded. We have too many stores in this country," Kapner says. "By one count there's something like 23 square feet of gross leasable space for every person in the country."
But brick-and-mortar isn't completely done for. In fact, several e-commerce-only companies have opened physical stores for the first time. Amazon opened its first permanent store in Seattle in November.
Some online sellers say customers want to have a physical experience. Warby Parker, an online eyeglasses store, now has brick-and-mortar stores in several states around the country.
"There's still something tangible that you can't replace, when you're walking into a store, engaging all five senses," Warby Parker CEO Dave Gilboa told NPR's Elise Hu.
Physical stores aren't going away anytime soon, but the ongoing struggle between brick-and-mortar and e-commerce is good for the rest of us, Kapner says.
"Consumers are really the big winners here because they have all the options now," she says.
MICHEL MARTIN, HOST:
The auto industry may be celebrating, but 2015 was not a great year for every business. In a few minutes, we'll hear about several major companies that had troubles. One of the small businesses that had to make tough choices is CakeLove, a bakery in Washington, D.C.'s, historic U Street neighborhood. When it opened back in 2002, The Washington Post said it created a, quote, "baked good buzz years before people thought of standing in line for a cupcake," unquote. CakeLove's success turned owner Warren Brown into a celebrity foodie. By 2005, he was hosting his own show, "Sugar Rush," on the Food Network. At one point, his empire included seven stores and a cafe. But the last brick-and-mortar store is set to close at the end of the week. He's turning CakeLove into an online business. Recently, Brown shared his story with us, starting with what inspired him to open up shop.
WARREN BROWN: Baking was a New Year's resolution for me. And I was tickled that people were interested in buying the cakes, but my curiosity about baking and my passion for sharing it with people has never, you know, gone away.
MARTIN: Do you have any advice for people who are thinking about ending something or starting something? I mean, how do you know when it's time?
BROWN: I don't really think you're ever going to know it's time to have done something until you've already done it. When you're in the midst of it, it's very, very difficult to know, you know - is this actually it? My biggest advice to other people is, like, you're always going to be a little scared, nervous, frightened about going from the known to the unknown. There's not that much you can do to ameliorate that. Just kind of have to get used to it and recognize that if it's a solid plan, you should feel good about it.
MARTIN: Warren Brown is the owner of CakeLove, which is closing its last brick-and-mortar store in Washington, D.C., at the end of this month. And he's focusing now on his other businesses, including Cake in a Jar. Warren Brown, thanks so much for speaking with us, and happy new year to you.
BROWN: Thank you, Michel. Happy new year.
MARTIN: So let's turn now to some big companies that went through major changes in 2015 - retailers, including RadioShack, Office Depot, Staples, American Apparel and even Target have all announced closing stores over the past year. We called The Wall Street Journal's Suzanne Kapner in New York to find out why.
SUZANNE KAPNER: Well, we've see the shift in online shopping becoming even more pronounced. We've noticed that very much during this holiday season on Black Friday, the crowds at stores were noticeably thinner - same on Super Saturday. And you just see more and more people ordering gifts online, particularly during the holiday season. They don't want to fight the crowds at the mall. And retailers have just made it too easy for them, with free shipping, free returns, last-minute delivery guaranteed. So, you know, we really reached that tipping point where online is really starting to pressure the stores at the mall. And you're seeing, you know, those stores at the mall really offering these big, big discounts to try to get shoppers in their doors.
MARTIN: So brick-and-mortar stores are really the ones where this is showing up. That experience is really changing.
KAPNER: The experience is changing at the brick-and-mortar store. And retailers are trying to - they're trying to figure out ways to get you to make a visit, whether it is, like, an experience, like having a special event at the store. There are Origin stores that now have, like, these sinks, and they let you wash your hands and try the product. They have coffee bars. Uniqlo has Starbucks in its stores. They have couches, TVs. The retailers are trying to sort of make the shopping at their stores into an experience to give you a reason to visit.
MARTIN: Now, we just heard from a person who - you know, you'd think a bakery would be the ultimate kind of brick-and-mortar thing. You know, it's generally kind of an impulse purchase. You walk by. You smell it. It smells good. You're hungry. You go get your cupcake. And this person - the person we just spoke to, Warren Brown - said that he's actually moving to all online - that you can still order his goods, but he's going to deliver them online, or maybe they'll be available in stores. So haven't stores really contributed to this themselves by shifting a lot of their operations online?
KAPNER: Well, they've had no choice but to shift online. The way they've contributed to the problem is by over-expanding. Over the past decade or two, you've just seen these chains open dozens and dozens of stores. We have too many stores in this country. By one count, there's something like 23 square feet of gross leasable space for every person in the country. We don't need this many stores, and now as people buy more online, we certainly don't need as many stores. But that doesn't mean stores are going away. In fact, you see online retailers - retailers that started as e-commerce-only players like Bonobos and Warby Parker - they've actually started opening stores because what people are saying is the sweet spot is you want some combination of online and a physical experience.
MARTIN: So you're leading me to the last question I have. What does this mean for workers, and what does this mean for consumers?
KAPNER: Well, for workers, you know, the type of job openings have shifted. You've seen during this holiday season there was a big shortage in warehouse workers. Retailers are scrambling to find employees to fill their warehouse to stock, you know, to handle their logistics and their backend e-commerce operations. And they've been cutting back on the number of employees on the store floor, so the type of labor is shifting. And, you know, for consumers - consumers are really the big winners here because they have all the options now. I talked to a woman yesterday who - on Sunday, she ordered Christmas gifts without leaving her bed, so you can't really beat that as a shopper.
MARTIN: That's The Wall Street Journal's Suzanne Kapner with us from New York. Suzanne, thanks so much for speaking with us, and happy New Year to you.
KAPNER: Thanks. Happy New Year to you, too. Transcript provided by NPR, Copyright NPR.