Burlington Stores Inc. recently announced that it will shutter its ecommerce store. Online sales only brought in 0.5% of total sales for the off-price retail chain, CEO Michael O’Sullivan told investors March 5, according to a Seeking Alpha transcript.
Ecommerce operations—when accounting for the cost of merchandising, processing, shipping and returns—were too high of a cost to continue investing in, O’Sullivan said. This is especially true for Burlington, when the average price of its products is $12, he said.
Burlington plans to transition its ecommerce site into a marketing tool, “to increase brand engagement and drive traffic to our stores while continuing to invest in our growing retail footprint,” a Burlington spokesperson told Digital Commerce 360. Burlington declined to comment on when it will stop processing ecommerce orders.
Burlington plans to use the resources it had dedicated to ecommerce to drive growth at its stores. Burlington says it has room to grow stores sales, as it only has 720 stores. Its off-price retail chain competitors include Ross with 1,805 stores and TJX Cos. Inc. (operator of TJ Maxx, Marshalls, HomeSense, HomeGoods, Winners and Sierra Trading Post) with 4,529 stores.
“Our top-line growth in the last three years has averaged about 8% per year driven by our bricks-and-mortar stores,” O’Sullivan said. “We’re clearly taking market share. Of course, we expect and we anticipate ecommerce is going to continue to grow in many sectors of retail. But in the moderate off-price business, we believe growth is going to be driven by physical stores.”
Shuttering its ecommerce site is a fiscally sound move for Burlington, says Brendan Witcher, principal analyst at Forrester Research Inc.
“For certain industries, it makes more sense financially to simply serve those customers that want to touch and feel products before buying them,” Witcher says. “Companies that carry products that the vast majority of customers feel more comfortable trying on or out before buying should consider a move like this.”
“Burlington did nothing wrong, people just feel more comfortable buying off-price items after looking at them,” he adds.
Stores are especially important to Burlington given its inventory model, in which it has less control than an average retailer in its depth of product assortment. This “treasure hunt” that Burlington has in stores is hard to create online, O’Sullivan said.
Digital Commerce 360 estimates that Burlington.com brought in $36.3 million in online sales in 2019, a 9.7% year-over-year increase compared with $33.1 million in 2018. It ranked No. 655 in the 2019 2019 Digital Commerce 360 Top 1000, and ranked No. 10 in the off-price apparel subcategory.
The top 10 off-price apparel retailers ranked by 2019 online sales are:
As a subcategory, 10 online retailers collectively generated $2.62 billion in 2019 online sales, a 24.6% growth over 2018, when these retailers had $2.10 billion in online sales, according to Digital Commerce 360 estimates. The median online sales growth for 2019 for these 10 retailers was 17.5%.
Because Burlington says online sales only represent 0.5% of its total sales, the impact of closing ecommerce on its overall business is “not material,” O’Sullivan said.
Closing ecommerce and focusing on stores is the opposite strategy that other retail chains have taken, in which they’ve closed their struggling stores and were reborn as an online-only brand. For example, women’s apparel brand The Limited, electronics and appliance retailer Circuit City and department store chain Bon-Ton have all shuttered stores and re-launched online within the past five years.