After a year of skyrocketing retail sales turbocharged by stimulus payments and online spending, consumers have started tapping the brakes.
Retail sales rose by just 0.3 percent last month, compared to January, when growth was revised upward to 4.9 percent. That’s according to the latest report from the Commerce Department, released Wednesday.
Online sales, which now account for 12.9 percent of retail sales, were actually down by 3.2 percent in February, compared to a 14.5 percent jump in January. Restaurants and apparel held up better than most other categories as consumers returned to dining out and bolstered their wardrobes for the office. But the sharp turn in sales has analysts wondering whether e-commerce can keep up its hot streak.
‘“We were all spending our lives in digital for the last two years,” said Rob Garf, VP and GM for retail with Salesforce, which makes software to manage customer relations. “The big elephant in the room now is how are we going to continue on this tear of digital growth?
One answer: revive brick and mortar and open more stores. Garf said that during the past two years, some big retailers discovered that consumers who shop online, as well as in stores, tend to buy more. The industry is catching on. Despite supply chain problems, retailers announced more than 8,100 store openings last year, according to the National Retail Federation, more than double the number of closings.
John Mulligan, the chief operating officer of Target, told investors this month that Target stores, handled more than 95 percent of the company’s $100 billion in sales last year, by fulfilling orders made directly online or for pick-up at the store. He said the online business also helped drive a 12 percent increase in in-store traffic. 95 percent of sales were directly online or online with pickup in physical stores
David Bassuk, a co-leader of the retail practice at the consulting firm AlixPartners, said: “It used to be that retailers with stores would happen to have an online presence, and now the mindset has shifted.” Getting consumers to come into the store is a whole different game.”
And those efforts are unfolding on a whole different playing field, where in-store and online meet in a hybrid model that allows for lower levels of inventory and fewer workers.
Bed Bath & Beyond, for instance, recently remodeled its flagship New York store, cutting the number of products it offers almost in half. Instead of stocking a particular blanket in six colors or a door mirror in multiple sizes, it lines the shelves with QR codes shoppers can scan to order that blanket or mirror in the color or size they need and pick it up at the store or have it shipped to their homes. Best Buy used its extra space to open a cafe and a SodaStream bar.