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US Department Store Sales Are Declining

Ecommerce sales are on an upward trajectory

October 24, 2016 | Retail & Ecommerce

The strength of the US department store is tied closely to the health of the mall, which wavers between merely unwell to terminally ill, depending on the source and the metrics it uses. As shopping centers close around the country, traditional anchors like Sears and Macy’s shutter along with them. Pruning physical stores as a cost-cutting measure has been coupled with a focus on digital channels, which hold more promise for profitability, as explored in a new eMarketer report, “Department Stores and Digital Commerce 2016: Trends and Benchmarks” (eMarketer PRO customers only).

US Department Store Retail Sales, 2005-2015 (billions and % of total retail sales*)

US department store sales have been on a steady decline over the past decade, shrinking from $87.46 billion in 2005 to $60.65 billion in 2015, according to US Department of Commerce figures. A shift to ecommerce is a partial explanation, but shoppers have also turned to off-price and specialty retailers like T.J. Maxx and Victoria’s Secret, becoming less loyal to the everything-under-one-roof approach of the classic department store.

Looking at the US department stores analyzed by eMarketer, the segment’s top nine retailers ranked by ecommerce’s share of total revenues between January 2015 and January 2016 range from a high of 28.1% for luxury retailer Neiman Marcus to a low of 6.9% for regional brand Bon-Ton. Macy’s fell in the middle with 15.2%. Like last year, the higher-end retailers were more successful, both as a result of larger investments in digital as well as attracting a clientele more inclined to buy digitally.

A March 2016 analysis by Credit Suisse pegged US department store ecommerce similarly, at 14% of total revenues last year, double the rate from 2012.

Top 15 US Retail Websites, Ranked by Visit Share, Dec 2015 (% of total)

All of the above retailers experienced growth in ecommerce sales except Sears, which saw a year-over-year decline of 1.5%. Lord & Taylor had the largest increase (42.6%), followed by Saks Fifth Avenue (38.4%) and Nordstrom (20.2%). Though Neiman Marcus, Nordstrom and Saks Fifth Avenue had the highest proportion of digital sales, Macy’s dominated in overall ecommerce ($4.11 billion) just as it did with in-store sales. Its ecommerce sales growth was also solid, climbing 10.2% year over year.

As evidenced by ecommerce sales growth from most major department stores, digital is undoubtedly changing the landscape in this sector. And mobile is a contributing factor to this shift.

Unsurprisingly, Amazon.com was the leading US retail website visited in December 2015, according to ecommerce platform Connexity (formerly Shopzilla), taking 34.50% of the share. However, four department stores made the top 15, with Kohl’s (1.68%) and Macy’s (1.59%) ranking the highest. The popularity of these particular websites was likely influenced by holiday promotions.

US Smartphone Users Who Used Their Smartphone More Frequently to Research Select Product Categories/Retailer Types, Nov 2015 (% of respondents)

Department stores were one of the leading categories for which US smartphone users relied on their devices to research products, according to a November 2015 Accenture survey. Nearly half (47%) of these multichannel shoppers used phones in this manner. Nearly as many named apparel—a department store mainstay—as a category for which they used their smartphone more frequently.

eMarketer PRO customers can view the full report here.

Get more on this topic with the full eMarketer report, “Department Stores and Digital Commerce 2016: Trends and Benchmarks.”

eMarketer releases over 200 analyst reports per year, which are only available to eMarketer PRO customers.

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