August 19, 2013
Should Tuesday Morning Have Said Good Night to E-Commerce?
Going against a wave of online euphoria elsewhere, Tuesday Morning, the close-out retailer of home goods, quietly shut down its e-commerce operations in July.
On its Facebook page, Tuesday Morning said the store is "returning to its roots" with the new policy. Under interim CEO Michael Rouleau, the former chief executive of Michaels Stores, Tuesday Morning is in the midst of a turnaround focused on reviving its store base and better defining its brand identity. The 2008 housing bust particularly hampered the chain.
But getting the most attention was that the retailer on its website called out "the nature of our closeout business" as the reason it exited online selling. Closeout retailers in general have also been slow to embrace e-commerce because of the channel’s unpredictable inventories. Selling closeouts online, according to The Wall Street Journal, involves "a constant stream of one-time items and overruns that arrive every day from a patchwork of department stores and manufacturers."
The Associated Press also noted that the "treasure hunt" atmosphere at closeout stores is hard to replicate online.
Still, online shopping club and flash sites such as One Kings Lane and Kynetic LLC’s Rue La La, owned in part by eBay, have reportedly drawn the broad attention of deal hunters. Dollar General launched its e-commerce site in 2011. TJX Cos., the largest closeout retailer, is planning to launch e-commerce this year. Big online investments are also being planned for Saks Inc.’s Off 5th and Nordstrom’s Rack off-price concepts.
But given the investments required in managing orders, returns and other customer service demands of an online business, Marshall Cohen, chief retail industry analyst with The NPD Group, believes Tuesday Morning may be better off focusing only on its in-store impulse shoppers.
"Everybody thinks they should have a Facebook page, they should have a Twitter handle, they should have a website — that is not entirely true," Mr. Cohen told The Associated Press. "When a company is progressive enough to know that they are not good enough at it. … I give them kudos for getting out."
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Discussion Questions
Has it become a requirement for stores, big or small, to offer consumers e-commerce? Is running an efficient and accurate online business an overwhelming challenge for close-out retailers? Did Tuesday Morning make the right move in closing its e-commerce business?
Poll
At the end of the day, unless you’re Amazon, every segment of your operation—online included—must make a profit. I think they did the right thing.
As Bob pointed out, it’s a “requirement” to offer e-commerce only if you can make money at it over the long haul. Few companies can afford the sort of investment spending that drained profitability from Amazon for years while it built market share, but of course Amazon is a web-only play for now.
If Tuesday Morning found that it could not execute e-commerce well—because of the unpredictability of its merchandise flow—then it was probably detrimental to the brand. The brick-and-mortar customer may tolerate a “treasure hunt” in the store, but the e-commerce customer has different expectations. This will be an interesting case study for how TJX plans to re-enter the omnichannel fray.
While there is no shortage of off-price online merchants—flash sellers and otherwise—it seems short sighted to give up on ecommerce. But that very same advent of flash sites is why Tuesday Morning is in the turnaround situation it faces.
Don’t confuse Tuesday Morning’s decision to shutter its online store with abandoning e-commerce.
E-commerce comes in many more forms than an online shopping cart. There’s CRM (email newsletters, category preferences), traffic drivers (merchandise alerts, store finders) and in-store (tablets, endless aisles), among others that don’t require real-time inventory updates.
Motley Fool exaggerates that Tuesday Morning is “giving up its website.” It’s not. Instead, TM is refocusing attention from its 1% of sales online to grow the 99% in-store.
This is a huge mistake. In 5 years, Tuesday Morning will be wondering why no one is in their stores as others replicate what they do, online.
There is no reason to think this is a decision cast in stone. Tuesday Morning may find other ways to make their e-commerce business profitable. Today’s decision is not tomorrow’s rule of business. Technology—and ways to make it work as a profit center—is always changing.
I wrote my own piece on this today. I get why it’s hard to be profitable at it…but I don’t think single channel retailing is going to remain tenable going forward.
I came to this expecting to applaud their effort—or non-effort, as it were—but after reading the comments, I’m left with a certain ambivalence. No, you shouldn’t do things that lose money, but if they’re losing money only because they’re not doing something properly, then that’s obviously a different issue.
I won’t presume to question the actions of a company I know nothing about, but let’s just say I find the reasons offered unconvincing. As for the more general issue, not every business needs an e-commerce presence—hot dog carts, for example—and certainly I’ve ranted here often that I think for for some industries (CPG, grocery, food service) the e-commerce effects will be small (smaller than many have claimed), but that’s not the same as saying I think you shouldn’t bother. And for retailers specifically, save for a few unique cases, I would say the answer is a definite “yes.”
One thing we’re finding out from our research: people still love stores—physical stores, that is. They love to touch and feel what they’re going to buy and they love the instant gratification of walking out the door with their choices. Buying in a store is emotional (love). Buying online is functional (fulfill).
Tuesday Morning is smart to focus on their stores, not only for those reasons, but also because of (as they stated) the nature of their business is “get it while you can.” To do something like that online would definitely divert focus from their stores and probably not be worth it—something they most likely already know.
Multipart answer. Is it a requirement? No. Critical factors such as existing online competition, relative scale, table stakes in site functionality and customer acquisition costs need to be considered. While launching an ecommerce site is easier and less expensive than opening a brick and mortar chain, it is not free, and barriers to entry which were previously low or nonexistent are rapidly becoming relevant.
Some of the retailers mentioned are not, in truth, close-out operations. TJX actually has a considerable private brand business, as does Dollar General. Nordstrom Rack is in a symbiotic relationship with the core brand which provides a degree of predictability. True close-out businesses are extremely challenging to operate online profitably. Not only are margins thin, but the high turnover of product means higher per revenue dollar expense to merchandise and maintain the site.
It seems clear from Tuesday’s own statements that the ecommerce business was a distraction. Absolutely they may have made the right move to eliminate a management and resources distraction in order to focus on core competencies with higher upside—the brick and mortar business.
I applaud this move. I looked at some e-commerce sites for various outlet stores—the closest I could come to a parallel kind of business—and concluded that they succeeded because they were either single-branded (e.g., Coach) or, like Gap, offered limited brands and heavily-controlled inventory. Tuesday Morning does not meet these criteria.
Any 21st century retail company that intends to do business without the assistance of Information Technology is forced out of business at its inception. The announcement in this discussion is a statement that asserts Mr. Rouleau’s leftover 19th century retail mentality is here to stay. There are just to many hands-free, inexpensive options available to retail businesses that allow for exposure and growth with little or no experience. Tuesday Morning’s future is tied to that of the buggy whip. What a mistake… What a shame!
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At the end of the day, unless you’re Amazon, every segment of your operation—online included—must make a profit. I think they did the right thing.
As Bob pointed out, it’s a “requirement” to offer e-commerce only if you can make money at it over the long haul. Few companies can afford the sort of investment spending that drained profitability from Amazon for years while it built market share, but of course Amazon is a web-only play for now.
If Tuesday Morning found that it could not execute e-commerce well—because of the unpredictability of its merchandise flow—then it was probably detrimental to the brand. The brick-and-mortar customer may tolerate a “treasure hunt” in the store, but the e-commerce customer has different expectations. This will be an interesting case study for how TJX plans to re-enter the omnichannel fray.
While there is no shortage of off-price online merchants—flash sellers and otherwise—it seems short sighted to give up on ecommerce. But that very same advent of flash sites is why Tuesday Morning is in the turnaround situation it faces.
Don’t confuse Tuesday Morning’s decision to shutter its online store with abandoning e-commerce.
E-commerce comes in many more forms than an online shopping cart. There’s CRM (email newsletters, category preferences), traffic drivers (merchandise alerts, store finders) and in-store (tablets, endless aisles), among others that don’t require real-time inventory updates.
Motley Fool exaggerates that Tuesday Morning is “giving up its website.” It’s not. Instead, TM is refocusing attention from its 1% of sales online to grow the 99% in-store.
This is a huge mistake. In 5 years, Tuesday Morning will be wondering why no one is in their stores as others replicate what they do, online.
There is no reason to think this is a decision cast in stone. Tuesday Morning may find other ways to make their e-commerce business profitable. Today’s decision is not tomorrow’s rule of business. Technology—and ways to make it work as a profit center—is always changing.
I wrote my own piece on this today. I get why it’s hard to be profitable at it…but I don’t think single channel retailing is going to remain tenable going forward.
I came to this expecting to applaud their effort—or non-effort, as it were—but after reading the comments, I’m left with a certain ambivalence. No, you shouldn’t do things that lose money, but if they’re losing money only because they’re not doing something properly, then that’s obviously a different issue.
I won’t presume to question the actions of a company I know nothing about, but let’s just say I find the reasons offered unconvincing. As for the more general issue, not every business needs an e-commerce presence—hot dog carts, for example—and certainly I’ve ranted here often that I think for for some industries (CPG, grocery, food service) the e-commerce effects will be small (smaller than many have claimed), but that’s not the same as saying I think you shouldn’t bother. And for retailers specifically, save for a few unique cases, I would say the answer is a definite “yes.”
One thing we’re finding out from our research: people still love stores—physical stores, that is. They love to touch and feel what they’re going to buy and they love the instant gratification of walking out the door with their choices. Buying in a store is emotional (love). Buying online is functional (fulfill).
Tuesday Morning is smart to focus on their stores, not only for those reasons, but also because of (as they stated) the nature of their business is “get it while you can.” To do something like that online would definitely divert focus from their stores and probably not be worth it—something they most likely already know.
Multipart answer. Is it a requirement? No. Critical factors such as existing online competition, relative scale, table stakes in site functionality and customer acquisition costs need to be considered. While launching an ecommerce site is easier and less expensive than opening a brick and mortar chain, it is not free, and barriers to entry which were previously low or nonexistent are rapidly becoming relevant.
Some of the retailers mentioned are not, in truth, close-out operations. TJX actually has a considerable private brand business, as does Dollar General. Nordstrom Rack is in a symbiotic relationship with the core brand which provides a degree of predictability. True close-out businesses are extremely challenging to operate online profitably. Not only are margins thin, but the high turnover of product means higher per revenue dollar expense to merchandise and maintain the site.
It seems clear from Tuesday’s own statements that the ecommerce business was a distraction. Absolutely they may have made the right move to eliminate a management and resources distraction in order to focus on core competencies with higher upside—the brick and mortar business.
I applaud this move. I looked at some e-commerce sites for various outlet stores—the closest I could come to a parallel kind of business—and concluded that they succeeded because they were either single-branded (e.g., Coach) or, like Gap, offered limited brands and heavily-controlled inventory. Tuesday Morning does not meet these criteria.
Any 21st century retail company that intends to do business without the assistance of Information Technology is forced out of business at its inception. The announcement in this discussion is a statement that asserts Mr. Rouleau’s leftover 19th century retail mentality is here to stay. There are just to many hands-free, inexpensive options available to retail businesses that allow for exposure and growth with little or no experience. Tuesday Morning’s future is tied to that of the buggy whip. What a mistake… What a shame!