Big box stores' big problem? They're just 'average'
Big box retailers are often criticized for carrying the same old product across the same old stores.
According to a new report from digital think tank L2, that conventional thinking appears to have crossed over into the digital world. After evaluating 64 big box stores on four categories-website and e-commerce, digital marketing, mobile and social media-L2 concluded that 39 percent of the companies' digital IQs are just "average," "demonstrating gross conformity across a variety of brands and distinct business models." Some of the retailers that earned this ranking were Bed Bath & Beyond (BBBY), PetSmart (PETM), RadioShack (RSH), Costco (COST) and Belk (BLKIA). Twenty-seven percent, including low-price operators T.J. Maxx (TJX) and Dollar General (DG), ranked as "challenged," while 9 percent, including grocers Albertsons and Trader Joe's, ranked as "feeble." PetSmart, Trader Joe's, Bed Bath & Beyond, Costco and Belk declined to comment on their digital strategies. RadioShack spokeswoman Andrea McCauley said the electronics retailer has invested in and changed much on its website, creating a "clean, uncluttered design that is organized more by interest, category, theme or seasonal topics, which lead the consumer deeper into the site to the product pages." She added that its mobile design has also been enhanced. None of the other stores immediately returned a request for comment.
Read More Better move fast! Amazon pushing deals to Snapchat Despite retailers' big push toward digital, just 14 companies earned "gifted" rankings. Only two-Home Depot (HD) and Wal-Mart (WMT)-earned the "genuis" title. (See below for the top 10.) "There's this myth that digital levels the playing field ... I don't think that could be more incorrect," said Scott Galloway, founder of L2. "A lot of these guys who are struggling to meet earnings just don't have the dry powder to throw at technology." Many of the retailers who rounded out the bottom of the list are at a natural disadvantage because of their business models. The grocery industry, in particular, operates on traditionally low margins, which can make it difficult to pour money into building out a comprehensive online strategy. Grocery sales are also underpenetrated on the Web compared to other areas, such as apparel, making it less of a priority, Galloway said.
Off-price stores such as T.J. Maxx face their own set of challenges, because their products are priced so low that shipping costs are more prohibitive. On Ross Stores (ROST)' most recent earnings call, the company's president reiterated that it has no plans to operate an e-commerce business, because it doesn't seem economical for a retailer whose average unit price is $10. On the flip side, struggling department stores J.C. Penney (JCP), Sears (SHLD) and Kmart all earned "gifted" rankings. L2 called out Sears' early adoption of the ship-from-store capability, which many other retailers are just now adopting. Kmart led the index for the most YouTube channel views, while Penney's earned kudos for its mobile-optimized site and customer service-oriented tweets. Despite these companies' high rankings, Galloway emphasized that they can't rely on a digital strategy alone to boost their business.
Read More Sears earns 'genius' ranking, tops Saks, Neiman "Digital is a fantastic tool but it's not a strategy in and among itself," he said.Click here for the full report.Note: This story has been updated to include comments from RadioShack
