E-commerce grew 20% for Costco in fiscal 2015—20 times faster than store sales.
CEO Jerry Storch outlines what he sees as the future of retailing.
Jerry Storch, the chairman and CEO of Toys ‘R’ Us Inc., ate the words of his younger self yesterday during his keynote presentation at the Shop.org conference in Denver. Long an outspoken proponent for the dominance of stores, Storch revisited quotes he pulled from his previous keynotes and industry presentations and edited those views to reflect what he now sees as the future of retailing. He said the most successful retail brands will embrace so-called omnichannel retailing, where all sales channels, be they the web, stores, mobile or others, are integrated to serve consumers however and wherever they want to shop. He said retailers with bricks-and-mortar holdings are positioned to thrive, even more than web-only retailers, if they can deliver on the omnichannel promise.
“The Internet is as much an opportunity as it is a threat, but we must be aggressive to seize the day,” Storch said.
Storch detailed what he sees as the disadvantages of web-only retailing, focusing on what he called the “direct-to-home cost penalty.” He said it costs three times as much for a retailer to ship a physical product directly to a consumer than it does to ship that same product to a store and have the consumer come and pick it up. Doing the latter creates price advantages. “If you can pick it up we can sell it for less,” he said.
He said some of the advantages consumers perceive as inherent to the web are poised to disappear. The big one, he said, is the perception that web-only merchants offer the lowest prices. He also pointed to pending federal legislation that looks likely to abolish the sales tax advantage web-only retailers have that lets them not charge or collect sales tax on purchases made by customers located in states where the retailer doesn’t have a physical presence such as stores or distribution centers. After that happens, Storch said he expects web-only retailers will open stores so they can behave like a physical retailer and fulfill on omnichannel promises. “Everyone will have both,” he said.
The retailers with the best products and services across all channels, he said, will be retail’s long-term winners. “It’s hard to argue with this proposition,” he said. He noted the development and launch of merchandise exclusive to Toys ‘R’ Us. The retailer earlier this week began taking pre-orders for the $149 Tabeo, a 7-inch tablet computer designed for kids. And this weekend, Storch said, Toys ‘R’ Us will launch a private label line of baby products with model-turned-TV-host Heidi Klum. “Ultimately, this is how we win,” he said. “It is about having product that isn’t available anywhere else. It’s about having the brands and products that people want.”
Storch also revealed several initiatives Toys ‘R’ Us, No. 29 in Internet Retailer’s Top 500 Guide, will implement during the next few months designed to help create the retailer’s omnichannel efforts. They include a ship-to-store option set to launch in October, when consumers will be able to order products online and have them shipped for free to any of the retailer’s stores. Later this month, the retailer will add kiosks in stores where consumers can pick up their Ship to Store and Buy Online, Pick Up In Store orders. The kiosks serve as online order pick up points. A consumer scans a bar code from his order confirmation, paper or mobile, and a clerk retrieves the order. The Buy Online, Pick Up In Store service is designed to let online consumers see, shop and buy from a local store’s inventory, then pick that order up in three or fewer hours.