Burlington bets the company that in-store-only is the method to go. Photographer: Christopher … [+]
Can any company manage to walk away from a million dollars in organisation? And the potential for far more?
That’s what Burlington Stores, the off-price retailer, is doing with its statement this week that it will end its e-commerce business.
It represented simply 0.5% of its total $2.2 billion in yearly profits, so it is not a big portion of its sales, to be sure. And within the off-price channel, e-commerce has been mainly an afterthought. The most significant player in the service, TJX, just recently rolled out online sales, and the No. 2 in the field, Ross Dress for Less, still doesn’t sell online.
So for Burlington, at least, e-commerce is at best a rounding error and, as it stated in making the statement, is an organisation irregular with its “treasure-hunt” shopping design. Burlington has also been riding a hot streak just recently, with strong sales development that has actually been richly rewarded by Wall Street, where its stock had nearly folded the previous year before the recent massive sell-off in the market driven by coronavirus fears.
“In our business, which is a moderate off-price company, the nature of the treasure hunt and the average price point that we run at mean that bricks-and-mortar stores have a substantial competitive and economic benefit over e-commerce,” CEO Michael O’Sullivan stated on the business’s Thursday profits call, according to a FactSet records.
“We plan to focus our energy and resources on driving successful sales growth in our bricks-and-mortar stores. We will likewise continue to aggressively broaden and upgrade this store network through our new shop opening and remodel programs.”
All of which makes sense– till it does not. Yes, e-com is a small service, and yes, it’s a hard one to align with the off-price physical shop design.
The track record for merchants that have walked away from e-commerce is not pretty. Among the most glaring examples was Pier 1, which under previous management shut down its online service to focus on its struggling stores. That method didn’t produce much improvement in the stores, and when a new CEO arrived, he reversed course and restarted e-commerce efforts, having lost valuable years of build-out, stuck playing catch-up. The merchant’s insolvency filing and massive store closings this year would appear to indicate that while online was not the only offender, it certainly must have contributed to the company’s miserable efficiency.
Burlington’s statement likewise handles new meaning given its timing. As the coronavirus threatens to paralyze public activities, consisting of at physical shops, those merchants that don’t have an online company to draw on are setting themselves up for a seriously uncompetitive position in the marketplace.
The retailer says it’s tough to do the treasure hunt thing online, and it is. Everybody in the organisation knows the dirty little trick of off-price retailing is that, progressively, the merchandise these shops sell is set, re-orderable items and that so-called “opportunity buys,” where inventory is limited, is less and less a part of their total product mix. The customer might purchase into the hunt story, and it’s excellent marketing, however it’s not quite the basis for these stores, as it was in the early days of off-price.
There are likewise some models to be followed in selling limited-inventory goods. Increasingly more sites are blending one-of-a-kind and classic items into their varieties and, in anything, creating even more of a treasure hunt than would exist in physical shops. And with the development of resale and second-hand clothing companies, where the merchandise is actually one of a kind, Burlington might have an outstanding game strategy it could follow to handle those type of goods.
Burlington’s e-com organisation may just be a million bucks or two now, and it is no doubt unprofitable. Would any business attempting to grow say it wasn’t investing in the fastest-growing part of the market? Would not it say, “Our company is small now, but it could grow if we worked to determine an online strategy for our category”? Wouldn’t it state, “We need an alternative in case of a catastrophic hit to our core channel of circulation”?