Amazon Europe losses greater than Sears

The 2017 near-billion dollar losses that tipped Sears into its bankruptcy filing were about the same as Amazon’s losses on European retail alone.

Sears lost $981mn in 2017.  Slightly less than as the $988 mn loss at Amazon’s European retail holding company, Amazon EU SARL,  according to accounts recently filed at London’s Companies House.

In fact, with online accounting for just 8.9% of US retail in 2017, the effect of Amazon, or any other online retailer, on Sears is widely over-rated. The US Census Bureau shows that online retail went on to grow 15% in the first half of 2018. But physical stores still accounted for three quarters of America’s retail growth.

Sears was struggling to adapt to a changing world before e-commerce was invented. It didn’t do any better after e-commerce came along, either But well run physical retailers are prospering. Indeed, the biggest clothing specialists on either side of the Atlantic (Inditex and TJX) get almost all their sales from physical stores. They’ve just upped their sales and profit forecasts as well

US sales through physical stores have grown every year since the 2008 recession.Physical stores have kept growing in the UK as well, Britain’s Office of National Statistics reports.

E-commerce doesn’t just sell less than people think: it costs more than people expected. Broker Credit Suisse now says that for selling clothes “not being online is an advantage”.

Primark makes more profit than any other UK clothes retailer – because it doesn’t sell online, not despite it. But it’s brilliant at using the web for talking to its customers, Credit Suisse adds. “Primark’s social media engagement is best in class”, it says, compared to H&M, Inditex, ASOS, Zalando and Boohoo.

Myths still abound

Our new report, “The Emperors’ Clothes”, shows how many other myths abound:

• American customers don’t demand online buying. TJX  and Ross Stores, America’s most profitable clothes shops, scarcely sell anything online either.
• Physical stores aren’t disappearing. In the US, consultancy Coresight revealed that in 2018 up to October 19, 70% more stores opened than closed. In the UK, by early 2018, the country’s tax collectors reported 2% more shops than in 2017 – and 8% more than in 2007. Worldwide, the ten major clothing specialists have three times more branches than in 2000
• In both Britain and the US, more people are working in retail today than a decade ago
• Clothes stores keep aiming at millennials – broke, indebted and in precarious jobs – when most clothes spending comes from the middle-aged. Too many are selling fashion when their customers just want stylish clothes that fit properly.

So the problem’s not about inevitable shifts in consumer purchasing. The main problem lies with many retailers’ management: most seem to have lost touch with their customers.

Retail used to be synonymous with frugality. But retailers have spent fortunes on new physical stores. The world’s top ten clothing specialists have three times more branches today than back in 2000.

Far more than the market needed then and still too many today – however fast physical retailers’ sales have grown .

So do examples of good retailing

The “Emperors’ Clothes” report looks at twelve retail fundamentals: areas where underperformers can learn from the successful. There are plenty of each group in both physical and online retailing

But there’s one area we can’t do anything about. Online specialists like Amazon, buoyed by seemingly limitless ability to raise money and chasing sales growth, seem to be selling below cost. This drags the whole industry into a downward spiral of price-cutting and vanishing margins.

Successful retailers have thrived in spite of this. The “Emperors’ Clothes” report shows how everyone else can.