March 20, 2013, 12:21 PM

The Flaw in Omnichannel Retailing

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Saks is not alone here. Macy’s, America’s largest traditional department store chain, no longer breaks out web numbers from stores sales, possibly because Macy’s' store vs. web growth rates are not all that different from Saks'. Macy’s increased total revenue last year 7% to $9.35 billion, but its web site grew an estimated 41% to $3.17 billion, according to the upcoming edition of the Top 500 Guide. In fact, a growing number of chains no longer break out their separate web and store numbers, telling their investors essentially what Sadove did—that all their sales come from the same inventory pool and how they are sold makes no difference.

A more believable reason for omnichannel chains refusing to break out web vs. store sales is because store sales are anemic, and by juicing up the overall revenue number with web sales the chain CEOs have a better growth story to tell investors. Clearly, Wall Street isn’t all that enthused about the omnichannel strategy followed by either Saks or Macy’s. In the last year their share prices have grown 1% and 5% respectively, meager compared to the Dow, which gained 10% in that time.

My advice to the retail chain bosses is this: Compete with Amazon and the other web-only retailers head-on by wooing web-centric consumers instead of overlooking them. Use your stores as cash cows and brand anchors and invest heavily in stand-alone e-retailing businesses that emulate the best practices of the new generation of merchants who—like their customers—eat, live and sleep online. And stop listening to consultants who are peddling new name for a failed strategy.

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