Arrow-right Camera

The Spokesman-Review Newspaper The Spokesman-Review

Tuesday, July 16, 2019  Spokane, Washington  Est. May 19, 1883
News >  Business

E-commerce driving rise in retail layoffs, report says

In this June 4, 2015, file photo, Jazmin Donati counts cash given to her by a customer after making a sale  in Miami. (Lynne Sladky / Associated Press)
In this June 4, 2015, file photo, Jazmin Donati counts cash given to her by a customer after making a sale in Miami. (Lynne Sladky / Associated Press)
Tribune News Service

CHICAGO – The latest spate of layoffs in the retail sector isn’t just a short-term slump, according to a new report by a Credit Suisse analyst.

Retailers are on track to lay off more than 37,000 people this year, more than double the layoffs announced last year and the most the sector has seen in the last eight years, analyst Michael Exstein wrote.

While layoffs are a standard response to periods with sluggish sales or extra pressure on profit margins, this round is a reaction to bigger shifts in where and how we shop, according to the report.

“What makes this cycle different is that much of the decline is due to a secular change in consumption, both due to new online competitors as well as the shift in sales to the lower margin e-commerce channel,” Exstein wrote.

Online retail sales made up just 7.3 percent of all retail sales in the U.S. in 2015 but are growing, according to the U.S. Commerce Department.

E-commerce sales were estimated at $341.7 billion in 2015, up 14.6 percent from the year before. Overall retail sales rose just 1.4 percent, according to the Commerce Department.

Most layoffs announced so far this year have come from companies closing unproductive stores or trimming the number of employees in stores to make physical stores more profitable, according to the Credit Suisse report.

“These layoffs are clearly an attempt to deal with the decline in brick & mortar productivity, as brick & mortar sales are lost to e-commerce while store expenses grow due to increasing wages,” the report said.

Many retailers are trying to invest in supply chain and technology improvements needed to compete online and “with so much of these companies’ total expenses related to labor, there are few other levers for retailers to pull in order to reduce their cost base,” the report said.

The estimated number of layoffs came from Bloomberg data tracking news reports announcing layoffs. More than 24,000 have been announced so far this year, and about two-thirds of layoffs typically come in the first four months of the year, leading to the projected 37,000 figure, according to the Credit Suisse report.

Sears Holdings announced last week 68 Kmart and 10 Sears stores will close by summer. Sears said eligible associates would receive severance and have the chance to apply for open jobs at other stores.

But Credit Suisse said its estimate could be on the low end. Several retailers, including Sports Authority, Pacific Sunwear of California and Hancock Fabrics, recently filed for bankruptcy and Bloomberg’s data may leave out layoffs that didn’t make headlines, Exstein said.

In 2015, there were 17,219 layoffs announced in the retail sector. The previous peak came midrecession in 2010, when 30,273 layoffs were announced, according to the report.

Subscribe to the Morning Review newsletter

Get the day’s top headlines delivered to your inbox every morning by subscribing to our newsletter.

You have been successfully subscribed!
There was a problem subscribing you to the newsletter. Double check your email and try again, or email webteam@spokesman.com