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Why Department Stores Will Rely on Online channels for Holiday Sales

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Surge in online sales

Sales of traditional brick-and-mortar retailers and department stores have been adversely impacted by the rising online sales of online retailers like Amazon.com (AMZN). According to the US Census Bureau, the US retail e-commerce sales grew 4.8% on a QoQ (quarter-over-quarter) basis to $111.5 billion in 2Q17 on a seasonally adjusted basis.

US retail e-commerce sales grew 16.2% on a YoY (year-over-year) basis in 2Q17. The US e-commerce sales as a percentage of total retail sales reached 8.9% in 2Q17.

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Importance of online sales in holiday season

Many customers who don’t get the time to go and shop in stores use the convenience of shopping online during this holiday season. According to the National Retail Federation, online and other non-store sales grew 12.6% in the 2016 holiday season on an unadjusted YoY basis. By contrast, sales at department store sales fell 7.0% percent in the 2016 holiday season.

Initiatives to improve online sales

Aside from increasing the merchandise offerings on their online channels, department stores are taking several initiatives to enhance their online sales. In August 2017, Macy’s (M) announced the expansion of its same-day delivery facility for products purchased online to 15 additional markets. Macy’s same-day delivery facility, serviced by Deliv, is now available in 33 markets.

Kohl’s (KSS) began shipping from its fifth e-commerce fulfillment center in Plainfield, Indiana, in August 2017. This new fulfillment center with state-of-the-art technology will likely help Kohl’s boost its online sales and maximize productivity. JCPenney (JCP) is all geared up for the holiday season, with 100% of its stores now shipping and fulfilling online orders.

In its fiscal 2Q17 conference call, Nordstrom’s (JWN) co-president Blake Nordstrom mentioned that the company is expanding its reserve online and try in-store service from six stores in the Seattle area to four more in the Chicago region. The company is planning to offer this service in about 50 stores by the end of the year.

In the next part, we’ll discuss the analysts’ expectations from department store sales.

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