by John Caulfield
The recent disclosures that two
major retail chains, Staples and Radio Shack, would be closing thousands of
stores confirms what has long been evident to anyone who has been following
recent economic trends: that E-commerce is fundamentally changing the retail
landscape, and that the creative destruction of this process will not be good
news for some of America’s formerly iconic retail brands.
The Commerce Department estimates
that online sales hit $262.5 billion in 2013, or about 6 percent of the $4.5
trillion consumers spent at retail in total that year. But the more telling
statistic shows that E-commerce sales have been growing at a rate four times
that of retail sales in general. Emarketer.com estimates that online sales in
North America, which jumped by 13.7 percent to $431 billion last year, should
hit $660.4 billion by 2017.
This online trajectory simply
reflects the way more consumers prefer to shop, and is being propelled by
nonstop advances in mobile technology. But the trend is a mixed blessing for
the U.S. economy, which is still having trouble creating new jobs from month to
month. There has been scant evidence so far that E-commerce will generate enough
jobs to replace those lost when brick-and-mortar stores go bust, especially
if—as some market watchers are already predicting—the next casualties are giant
retailers like Kmart, whose parent, Sears Holding Corp., lost more than $2.3
billion in the last two fiscal years.
Employment is the lifeblood of
the housing industry. People who aren’t working aren’t buying homes. And the
Census Bureau’s January estimates for annualized housing starts—a 2 percent
decline to 880,000 units for total starts, and a 6.7 percent decline to 573,000
units for single-family starts—can’t be shrugged off as simply the results of
Thankfully the employment
picture, on the whole, has been getting better, or at least stabilizing. And homebuilders
and suppliers that survived the past recession have actually been doing pretty
well lately, and are hiring again. (The country added 15,000 construction jobs
America’s largest builder,
PulteGroup, is coming off a year when its profits jumped more than tenfold, to
$2.6 billion. Its largest home-improvement retailer, Home Depot, saw its income
jump 18.7 percent to nearly $5.4 billion.
It’s worth noting, too, that in
January Home Depot acquired Blinds.com, the largest online retailer of window
coverings in the U.S. Depot’s online presence includes Redbeacon.com, which
matches homeowners with approved contractors.
Like it or not, the Internet is
where most consumers start when they are shopping for just about everything.
It’s also where businesses create markets for their products and brands. But
repeat after me: Social Media are not selling tools.
What builders and suppliers
should be asking themselves, then, is what their places are in this growing
online ecosystem. My guess is most would conclude they are still on the fringes.
Builders need to think harder
about how technology can expand their businesses. For example, Michigan-based
Marketplace Homes has been working with the software provider iRule to offer
appointment tours of builders’ model homes at the shopper’s convenience by
unlocking doors and turning on lights remotely, and conducting the tours via
the visitor’s cellphone.
And while very few consumers
would consider ordering a house online, it wouldn’t kill builders to offer that
option as an experiment and see how it flies with the public.
At the very least, builders must figure
out how to drive more prospects to their websites, keep them there with
compelling, easy-to-find information, and allow them to connect effortlessly with
a salesperson immediately.
Waiting for consumers to stroll
into your sales offices is so 20th century. And resisting the inevitability of
effectively plugging into your customers online can be fatal.