MONEY Shopping

5 Ways Department Stores Are Fighting For Your Business

Sears store in the mall
Keith Beaty

Macy's, Target, J.C. Penney, and other stores are getting creative in their quest to boost sales, or at least stay alive and relevant, in an increasingly crowded and complicated marketplace.

The all-purpose American department store is “dying.” We’ve heard this for years, to the point that the retail category is not unlike the old man in the classic Monty Python scene who is loaded up on a cart of corpses despite his protest, “I’m not dead!”

Yet while we’ve witnessed the collapse of Radio Shack and various teen fashion retailers, as well as the larger struggles of malls as a whole, the old-fashioned department store is, well, not dead yet. In fact, this week, a round of earnings reports revealed generally good sales performances in the fourth quarter—and during the all-important holiday period in particular—from Dillard’s, Target, and Kohl’s, among others. Sears sales were down for the 11th quarter in a row, but even its report was viewed as decent because the company lost significantly less than it did in the same period a year prior. J.C. Penney surprisingly posted a loss for the quarter as well, though comparable store sales were actually up 4.4%.

Even with the mostly positive earnings reports, Target’s failed expansion in Canada, as well as the trend to shutter more and more Target, Sears, Macy’s, and J.C. Penney stores in the U.S., demonstrates that while department stores are alive, they’re hardly kicking butt.

To avoid being written off for dead alongside Radio Shack, here are a handful of strategies you’re going to see more of from department stores:

Trying out new store models. This week Macy’s announced intentions to create a new off-price retail brand that would compete with discounters like TJ Maxx and highly successful “fast fashion” chains such as H&M and Forever 21. Meanwhile, Kmart is testing out a smaller store format, and Target is expanding its “Express” small-store model to more markets. Walmart has been going small too, with more non-supercenter “market” locations. Overall, the strategies show that the large department stores and discounters acknowledge that the one-size-fits-all approach is flawed, especially when the size in question is a hulking big box store.

Pushing web sales hard. Target offered free, no-minimum-purchase shipping for all online purchases throughout the 2014 winter holiday period. The move helped long-struggling “Tarjhay” increase digital sales by 30% for the year as a whole. Now it looks like Target is doubling down on its e-retail offensive, with this week’s decision to cut the minimum-purchase threshold for free standard shipping from $50 to $25—a change that undercuts Amazon, Best Buy, and Walmart, among others.

For its part, the world’s largest retailer is well aware that more shoppers are “omniconsumers” who make purchases via all channels, and it’s trying to win their sales at every turn. “No doubt business is going increasingly mobile and increasingly online,” Walmart CEO Doug McMillon told the Associated Press recently. “We don’t really care how the customers want to shop. We want to be in the position to serve them in any of those ways.”

Going old school with marketing. While virtually all retailers are seeking to juice web sales to compete with the likes of Amazon, J.C. Penney is trying to achieve this goal in an old-fashioned, seemingly unorthodox way. Starting in March, the department store that’s undergone several (mostly unsuccessful) makeovers in recent years will start mailing its oversized catalog to customers yet again. And one reason why they’re using this tool is that consumers are more likely to order merchandise online with a catalog in front of them.

Going invasively new school with sales pitches. Macy’s, Neiman Marcus, and Lord & Taylor are among the major retail chains that have taken the potentially creepy step of deploying wireless beacons that detect shoppers’ precise locations inside stores and send them info via smartphone about discounts, promotions, and special events.

Discounting in ways old and new. Discount-heavy Kohl’s, where you can “save” $2,136 on a $242 shopping excursion, and where no one in their right mind pays full price for anything, had an especially strong holiday quarter with 3.7% growth in sales, beating expectations of 2% to 3%. One thing this tells us is that the age-old sales tactic of “price anchoring,” in which “regular,” “original,” “suggested,” and “compare to” list prices are inflated so that the inevitable discounts seem all the more impressive, remains a surefire way to sucker shoppers into buying.

On the new frontier of discounting, Target is testing out a strategy from the playbooks of supermarkets and drugstore chains, quietly launched a rewards program mobile app in beta. Members get 10 points for every $1 they spend at Target, and 5,000 points can be traded in for 5% off your next total purchase at the store. For now, the program, called REDperks, is available on an invitation-only basis, and only in select markets.

MONEY online shopping

Target Undercuts Amazon and Walmart With Easier Free Shipping

Target sign
Mike Blake—Reuters

Target just cut its minimum purchase requirement to receive free shipping in half, from $50 to $25. That's $10 less than what you have to spend at Amazon or Best Buy for free shipping.

Target has a long history of being in the crosshairs of Amazon, what with the world’s largest e-retailer routinely undercutting Target’s prices, combined with a wide range of strategies to woo moms in particular away from “Tarjhay” with speedy one-click shopping. Perhaps Amazon’s most deadly weapon—causing trouble not only to Target, but nearly all brick-and-mortar retailers—is Amazon Prime, the subscription program that provides free two-day shipping, among other perks, in exchange for a $99 annual fee. Above all, what Prime membership does is dramatically increase one’s spending at Amazon.com because nearly all purchases made on the site will ship for free. And the purchases made at Amazon.com are purchases that are no longer taking place at Target, or via another retailer.

On Monday, Target went on the offensive by tweaking its own free shipping policy, with the hopes of stealing some business back from Amazon, among others. The new shipping policy, Target boldly claims, “Will Change Your Life,” presumably in ways not unlike how Amazon Prime is known to dramatically change one’s spending habits and errand schedule.

The new policy grants free standard shipping (3 to 5 business days) on all Target.com orders of $25 or more. Previously, the purchase threshold for free standard shipping was $50. The minimum purchase requirement for free shipping at Walmart.com, for instance, is set at $50, while Amazon and Best Buy offer free shipping on most orders if the total is $35 or more.

Clearly, the move gives Target a little leg up on the competition, and it could very well start a free shipping pricing war among retailers—a war that would obviously benefit shoppers. But how big of a deal is Target’s policy change really? And is there a prayer it could actually change your life?

The truth is that Target’s new policy won’t affect its best customers at all. That’s because the most loyal Target shoppers are highly likely to be in possession of the Target REDcard, a debit or credit card that providers the user with 5% off on all Target purchases, as well as free, no-minimum-purchase standard shipping on all online orders. What’s more, Amazon Prime subscribers who are happy with the service aren’t likely to be wooed away by Target.com—which has fewer items for sale than Amazon (who doesn’t?), and whose free shipping is slower than that of Prime.

The consumers being targeted by Target’s policy change, then, are those who aren’t regular Target shoppers and don’t subscribe to Prime, or those who do subscribe to Prime but have been thinking that maybe the annual membership fee isn’t worth it. Also, for Target’s offer to seem truly compelling, you must be someone who would regularly want to make online purchases of $25 but not over $35. Once you’ve hit the latter price point, after all, you can get free shipping from Amazon or Best Buy alongside Target, so Target’s free shipping is a wash.

All that said, there are probably some consumers who will view Target’s new policy as an appealing alternative to Prime and Amazon.com in general. Just as Target’s decision to offer a free non-minimum-purchase shipping promotion during the recent winter holidays gave its web business a boost, the retailer will certainly juice e-retail sales by cutting its free shipping purchase threshold in half. Some tiny portion of shoppers will probably “change their lives” by placing a few more small-money orders at Target.com now that shipping is free.

It seems unlikely, however, that the policy change will move the needle much in Target’s ongoing battle against Amazon, nor will it cure Target’s larger problems, including its failed expansion in Canada and the fading of its reputation among shoppers and the industry as retail’s cheap-chic darling.

MONEY online shopping

Become a Better Bargain Shopper in 7 Minutes Flat

computer cursor over "sale" sign
Sarina Finkelstein (photo illustration)—Getty Images (1)

The right tools and apps can help you land the best price every time you shop online.

As part of our 10-day series on Total Financial Fitness, we’ve developed six quick workouts, inspired by the popular exercise plan that takes just seven minutes a day. Each will help kick your finances into shape in no time at all. Today: The 7-Minute Bargain Finder

Buying on the web is convenient—maybe a little too convenient! Using smart apps and browser add-ons will help you score deals.

0:00 Surf to getinvisiblehand.com. This browser extension scours the web for the best price on whatever item you’re looking at online.

0:33 Adding it is simple. Scroll to “Download Now,” and in two clicks InvisibleHand pops into your bookmarks bar.

1:03 Take it for a spin. Recently, by scrolling to an HDTV on BestBuy.com and clicking on the yellow InvisibleHand banner at the top of the page, you would have seen links to five other sites selling the TV for less.

3:06 Head to Tracklf.com, a site that monitors price changes on millions of products. Click “Install Tracklf.”

3:49 Skip the lengthy explanation video and try it out yourself. Use the “Tracklf” button to see a three-month pricing history of any item and request an email if the price drops.

5:58 Grab your smartphone and search for “PriceGrabber” in the app store. This app lets you scan barcodes when you’re out shopping and see comparisons on in-store and online prices.

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  • Day 7: Find Ways to Save More
  • Day 8: Boost Your Earning Power
  • Day 9: Learn How Better Health Can Help Your Finances
  • Day 10: Shore Up Your Safety Net
MONEY Shopping

The Curious Ways Brutal Snowstorms Affect How We Shop

The region is being hit once again by snow, and some businesses such as this T.J. Maxx store in North Andover, Mass., were closed, February 9, 2015.
Jim Davis—Boston Globe via Getty Images The Northeast was hit once again by snow, and some businesses such as this T.J. Maxx store in North Andover, Mass., were closed, February 9, 2015.

As the snow piles up in the Northeast, business suffers at many restaurants and stores, as you'd expect. But bad weather isn't bad news across the board for retailers.

We’ve seen the pattern repeat itself many times over. Weather forecasters predict a big winter storm, and long before the snowflakes appear, panicked shoppers hit the supermarkets to grab whatever milk, bread, eggs, and, if you’re at Whole Foods, kale, is still available.

Likewise, the arrival of a blizzard—or rather, the forecast that one could be coming—all but guarantees that there to be a run on shovels, sand, salt, and other snow-coping materials at hardware stores and home improvement centers. Gas stations and stores selling winter boots and other cold-weather gear can rely on storm forecasts to create sales spikes too.

In these ways, at least, the storms pounding New England and much of the Mid-Atlantic region over the past few weeks have boosted retail sales in ways not seen since, well, last winter, when the polar vortex caused mad rushes on grocery stores throughout the Midwest.

And yet, bad winter weather is hardly a good thing for retail in general. In fact, for stores that aren’t selling groceries, gas, shovels, or boots, blizzards can be business killers. Jon Hurst, president of the Retailers Association of Massachusetts, told the Boston Herald that “conservatively,” retailers in the state have lost $10 million for each day they’ve been closed or had almost no business thanks to relentless snow. Restaurant owners in Rhode Island are calling this “the worst February in years” thanks to snow keeping would-be customers at home. Overall, a 2014 IHS Global Insight study found that a single-day shutdown in New York can add up to $700 million in total economic costs, including $152 million in lost retail sales.

Presumably, the bulk of those lost sales transactions would have been conducted in person. After all, snow and cold weather can only prod more consumers to stay indoors and shop online, right? Actually, the impact of big snowstorms on online shopping is a bit muddled.

On the one hand, 16% of consumers in a recent survey from Fluent said that they have shopped less this winter, while 27% said they have done more online shopping. So snow + frigid temperatures = increased online sales, right? Not so quick.

According to Adobe Digital Index data, the winter storm that hammered the Northeast in late January resulted in a $35 million decrease in online sales, largely because people were home rather than at work. “During the work week, a lot of people really do shop from their work desktop,” Adobe analyst Tamara Gaffney explained to InternetRetailer.com. “You also have power outages and people out shoveling snow. They’re not shopping, they’re doing other things. It has a negative impact on e-commerce.”

Another way that winter storms can wreak havoc on e-retail is that when roads are impassable or close to it, it’s extraordinarily difficult for goods to simply be picked up or delivered. For instance, a Federal Express Service Alert issued this week warned that in light of persistent snowy weather in the Northeast, “some service delays and disruptions can be anticipated for inbound and outbound shipments in CT, ME, MA, NH, NJ, NY, PA and VT.”

For what it’s worth, the impact of snow—even a series of storms in a particularly bad winter—is generally short-lived. Often, if snow or cold weather brings about a slow period for sales of cars or home appliances or whatever, there will be a significant, corresponding rise in sales once things warm up. In other words, the sales shift; they don’t simply disappear.

Besides, retailers really shouldn’t go blaming uncooperative weather as the reason sales have been poor. “It’s usually one of those ‘dog ate my homework’ excuses,” Forrester Research analyst Sucharita Mulpuru told Bloomberg News last fall, when some apparel stores were pointing the finger at warm weather for why winter fashions weren’t selling well. “Whenever something can’t be explained and is an anomaly — and it happens to coincide with an unusual weather pattern — that becomes the reason people supposedly didn’t shop.”

The observation calls to mind the way that Big Beer blamed unseasonably cold weather in the spring of 2013 as a prime reason macro beer brands like Budweiser, Miller Lite, and Heineken were experiencing slumping sales. Meanwhile, Bud and other major beer brands have seen sales decrease for years, and why this is so has a lot more to do with the increasing popularity of craft beer, cider, boutique spirit distilleries, and other alternatives to pale mass-produced American lagers than it does to any bad spell of weather.

MONEY online shopping

Amazon Prime Membership Should Come With a Warning

Amazon Prime packages
Justin Sullivan—Getty Images

And the warning is: After paying $99 for your subscription, you're going to spend a ton of money at Amazon.com.

Amazon rarely releases sales data to the media. Nonetheless, the idea that customers who subscribe to Amazon Prime wind up shopping and spending a lot more at Amazon is considered fact. After all, once customers are paying $99 for the service and know that express two-day shipping is available for free on nearly all purchases, it makes sense that they’ll stop shopping elsewhere and do most if not all of their online shopping at the site. It helps, of course, that Amazon has a reputation not only for selling a huge variety of merchandise, but for having low prices as well.

But what impact, exactly, does signing up an Amazon Prime membership have on the individual’s online purchasing habits? Again, it’s hard to say because Amazon is reticent to release data. What’s more, things are complicated because the people who find it most worthwhile to join Amazon Prime are those who shop often at Amazon in the first place. (When you’re a member, the more you spend, the more you “save,” at least in terms of shipping.) So it’s not simply a matter of figuring out how much Prime members versus non-Prime members spend at the site.

Still, it’s undeniable that Prime members spend a bunch more at Amazon than non-Prime members. In a recent story by a couple of my MONEY colleagues about Apple, Amazon, and Google in terms of investing opportunities, a ComScore report is mentioned revealing that “Prime members make twice as many purchases as nonmembers, and they spend 40% more per transaction.”

Read more: Why You Should Never Buy Stuff When You’re Sad

This week, a new survey was released by Consumer Intelligence Research Partners (hat tip: Huffington Post) with some precise dollar figures regarding the topic. According to a survey of consumers who made purchases at Amazon from October to December 2014, Prime members say they spend an average of about $1,500 at the site annually, versus $625 for non-members.

Owning an Amazon Kindle is also correlated with increased Amazon.com spending. Kindle owners (who may or may not also be Prime members) spend $1,450 per year at Amazon, compared to $725 per year for customers who don’t own Kindles, according to the survey. “Similar to Amazon Prime members, Amazon Kindle owners are better customers,” Mike Levin, partner and co-founder of CIRP, said in a press release about the new report. “They also shop more frequently, and also buy more expensive items on average.”

All in all, the spending data spells out plainly why Amazon pushes sales of Prime and Kindles so hard. In particular, the world’s largest retailer has been relentless in upping the Prime value pitch by adding streaming services, producing original movies, and such. Just last weekend, for instance, Amazon dropped the price of Prime to $72 and allowed everyone to stream its Golden Globe Award-winning online show “Transparent” as a way to show off one of the perks of being a Prime member.

Read more: Amazon Is Making It Easier to Publish Your Own Kindle Textbooks

It’s no mystery that Prime membership, Kindle ownership, or both are essentially gateways that welcome online shoppers into the Amazon consumershere and result in sharply increased spending at the site.

On the other hand, there’s good reason to believe that people who aren’t Prime members are more likely to shop around and make purchases at Amazon only when it’s clearly the most convenient or cheapest option. They don’t automatically defer to making purchases at Amazon, like Prime members appear to do. And based on some recent studies indicating that Amazon doesn’t have the cheapest prices across the board, it seems wise to browse a range of retailers rather than immediately head to Amazon for a one-click purchase of your latest need.

Read next: Amazon Outbid Netflix For Its Most Successful Show

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MONEY deals

Free ‘Transparent’ Streaming, Cheap Amazon Prime on Saturday

Jeffrey Tambor in Transparent
Beth Dubber—© Amazon/Courtesy Everett Colle Jeffrey Tambor in Transparent

Amazon already has tens of millions of subscribers to Amazon Prime. But Amazon wants more, and it's using a Transparent-Golden Globes-themed promotion on Saturday to win them over.

A report surfaced last autumn estimating that as many as 50 million people were members of Amazon Prime, the $99-per-year subscription service that includes two-day shipping on most purchases and unlimited streaming of video and music content. Mind you, that was before the 2014 holiday shopping season, during which Amazon reported some 10 million new members had signed up for Prime.

Previous studies have indicated that Amazon actually loses money on Prime due to all the shipping costs incurred by frequent shoppers. Yet Prime is undeniably a powerful revenue driver for the world’s largest retailer, because of the tendency of subscribers to make nearly all of their online purchases at Amazon once they’ve paid for a membership. Hence Amazon’s relentless push to boost Prime subscriptions at any and every opportunity.

And hence the latest Amazon promotion, which on Saturday grants everyone with an Internet connection free streaming of Transparent, the ground-breaking Golden Globe-winning comedy normally only available to Prime subscribers. Besides celebrating the success of Transparent and lead actor Jeffrey Tambor at the Golden Globes, the idea of airing the show for all to see is surely also a pitch to snag more Prime members. The implicit sales pitch being: Just look at the kinds of things you’d get to watch regularly if you were a Prime member!

What’s more, Amazon is giving Prime extra appeal by knocking the usual $99 price of a subscription down to $72 on Saturday, January 24. Why 72? Again, it has to do with the Golden Globes—the most recent awards were the 72nd in history.

MONEY The Economy

Why These 5 Companies Are Laying Off Thousands of Workers

eBay Inc. office building, San Jose, California.
Kristoffer Tripplaar—Sipa USA

The economy is on the mend. Unemployment rates are down. So what's up with all these companies slashing jobs by the thousands?

Here’s some explanation—note we used the word “explanation” not “justification”—for why a handful of companies are laying off large chunks of their workforces even as the economy is on the upswing and unemployment is falling month after month.

eBay: 2,400 jobs
On Wednesday, eBay announced it would be cutting 2,400 jobs in the first quarter of 2015. The company says that the layoff figure includes positions that are unfilled, so the actual number of people losing their jobs will be less than 2,400. What’s more, eBay points out that the figure represents only 7% of the company’s total workforce. (Are we the only ones surprised to hear that eBay currently employs 34,600 people?)

Among the factors influencing the layoff decision: “Weak holiday sales” and revenues that have been lower than analysts expected, as well as a company restructuring in anticipation of the spinoff of eBay’s online payment service PayPal. The company said it may also spin off a third division, eBay Enterprises, which runs e-commerce operations for other companies, explaining in a statement: “It has become clear that [eBay Enterprise] has limited synergies with either business, and a separation will allow both to focus exclusively on their core markets.”

As for weak sales, one reason eBay is suffering is that, unlike Amazon—which effectively uses its Amazon Prime membership program to create legions of shoppers who make the vast majority of their purchases at its site—many eBay customers use the site randomly and haphazardly rather than habitually. “It’s the infrequent shopper that comes two, three, four times a year,” eBay CEO Donahoe told USA Today. “They didn’t come back at the rate we thought.”

American Express: 4,000 jobs
During the course of 2015, AmEx plans on cutting costs by trimming 4,000 jobs after failing to meet long-term revenue growth target of 8%. The Wall Street Journal pointed to “a stronger dollar, a weak December for retail sales and the sharp drop in gas prices” as forces that hurt the company’s fourth quarter results—which actually showed revenue and profits increasing, just not enough to satisfy investors. The 4,000 layoffs represent 6% of AmEx’s total workforce of roughly 63,000.

Baker Hughes & Halliburton: 8,000 jobs
The two energy companies agreed to merge last autumn, and both ended the year strongly, with Halliburton posting revenues up nearly 15% and Baker Hughes achieving record revenues for the quarter. Nonetheless, in light of plunging crude oil and gas prices, oilfield services provider Baker Hughes announced plans for layoffs of 11% of its workforce, roughly 7,000 employees, while Halliburton plans for about 1,000 job cuts of its own.

“This is really the crappy part of the job, and this is what I hate about this industry frankly,” Baker Hughes CEO Martin Craighead said this week in a conference call with analysts. “This is the industry, and it’s throwing us another one of these downturns, and we’re going to be good stewards of our business and do the right thing. But these are never decisions that are done mechanically.”

Schlumberger: 9,000 jobs
Another oilfield services company, Schlumberger also reported surprisingly strong fourth quarter results despite the steep drop in oil and gas prices—and it too recently announced big-time layoffs. Last week, the company said it had laid off 9,000 employees worldwide in late 2014 as profits fell and demand for oil retreated.

Read next: Here’s What You Really Need to Advance Your Career

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MONEY online shopping

The Old-School Way J.C. Penney Is Taking Aim at Amazon

Customers shop at the J.C. Penney Co. store inside the Glendale Galleria shopping center in Glendale, California.
Patrick T. Fallon—Bloomberg via Getty Images Customers shop at the J.C. Penney Co. store inside the Glendale Galleria shopping center in Glendale, California.

Thanks to smartphones and screens available at every turn, it's easier than ever for shoppers to browse in one place and buy in another. And now the old-fashioned mail catalog is making a comeback.

For years, retailers have been trying to figure out how to best cope with the “omniconsumer.” Regardless of whether you’ve heard of the term or not, you probably are one. The term refers to shoppers who use all possible channels—online, in store, and sometimes even via catalog phone order—for the purposes of browsing, researching, and buying.

Several years ago, the biggest threat to the retail world arose from the trend of “showrooming,” or the act of browsing products in stores before ultimately purchasing them online for a lower price, typically at Amazon. The phenomenon led many retailers to expand price-matching policies to better compete with Amazon; the fact that Amazon is no longer assumed to always have the cheapest prices has hurt sales at the world’s largest e-retailer as well. The more recent flipside to showrooming has been “webrooming,” which entails browsing products online (often at Amazon) before ultimately purchasing them in a store.

A Boston Globe story published during the 2014 holiday shopping season offered a glimpse of the prototypical webroomer:

“I usually go online to check prices and narrow down what I want to get,” said Kameko Lindsay, a 21-year-old nursing student at Northeastern University. “Then I go to the store and see what I can find. For me, I’d rather touch things before I buy.”

Obviously, this kind of behavior causes havoc for Amazon and other pure online players. A recent Motley Fool post explored how webrooming and other trends—including the option to purchase online and pick up in a store—have been hurting Amazon. It’s still by far the world’s largest e-retailer, but it has slowly been losing market share, with online sales growth at Home Depot, Costco, Walmart, and others outpacing Amazon. And webrooming appears to be getting more common. A survey from Accenture finds that 78% of consumers have engaged in webrooming, versus 72% who say they’ve showroomed. In a similar poll from 2013, 65% of shoppers said they’d be likely to webroom, versus 62% who said they would showroom.

That’s only one example of how tech is tweaking shopper behavior and altering the retail landscape accordingly. Another, arguably more surprising example comes from an old-fashioned retailer—J.C. Penney— bringing back an equally old-fashioned sales platform: the print catalog. As the Wall Street Journal reported over the weekend, in March J.C. Penney will start mailing out 120-page glossy catalogs to customers, even though the struggling retailer hasn’t sent one out since 2010, and catalog mailings in general have fallen dramatically.

What’s spurring J.C. Penney’s renewed interest in catalogs is that, curiously, they seem to boost online sales. Kurt Salmon, the retail consultancy firm, notes that 31% of consumers have a print catalog handy at the time they’re making online purchases. What’s more, there’s some indication that people who purchase with the aid of catalogs tend to spend more.

MONEY online shopping

Why Amazon Is Losing Market Share to Big Box Chains

Boxes sit stacked before being loaded on a truck at the Amazon.com Inc. fulfillment center in Phoenix, Arizona, U.S..
Paul Morris—Bloomberg via Getty Images

As big box chains have improved their e-commerce platforms, they have found some surprising advantages.

Amazon.com has grown to a value of over $130 billion with barely any profit, largely due to its dominance of online retail. With a 23% market share of online retail sales, the company does more e-commerce business than its next 12 largest competitors, which includes the likes of Staples and Wal-Mart .

Without profits to underpin its share price, Amazon’s tremendous market value has been predicated on its dominance of retail’s biggest growth category as e-commerce sales increased 16% in the third quarter of 2014. According to conventional wisdom, Amazon’s lack of physical stores gives at an advantage over the big box chains like Wal-Mart and Best Buy. Because Amazon does not have the expense of brick-and-mortar stores, the thinking goes, it can offer shoppers lower prices and therefore a better value proposition.

But what if that wasn’t true?

The revenge of the big boxes

A recent report by the think tank L2 Inc. looked at 64 big-box chains, and uncovered some surprises in the industry.

Despite Amazon’s mammoth growth over the last decade, conventional retailers are now stealing e-commerce market share from the leader. In the first quarter of last year, Home Depot saw online sales jump 54%. Costco’s increased 48%, and Macy’s and Wal-Mart saw a 31% and 30% increase in the category, respectively. Meanwhile, Amazon’s retail sales grew just 20%.

Amazon’s dominance of the space owes more to the relatively small size of e-commerce rather than traditional retailers’ ineptitude. Despite its growth, e-commerce only makes up 6.6% of all retail sales, and volume sales are still growing four times slower than in physical stores. In the most recent quarter for which data’s available, e-commerce sales totaled $78 billion, while total retail sales in the U.S. were $1.18 trillion.

The reason why the big boxes ignored e-commerce for so long was simply because it wasn’t worth it. The vast majority of sales still take place at physical stores, but e-commerce has reached a tipping point where retailers have realized it’s beneficial to invest and grow sales in the space. As they’ve improved their e-commerce platforms, the big boxes have found some surprising advantages.

Amazon spent $6.6 billion on shipping costs last year, while it collected just $3.1 billion in shipping fees. Brick-and-mortar retailers can offer in-store pickup thanks to their physical locations, an option 19% of Internet shoppers have used.

Similarly, “showrooming,” the practicing of browsing in a store, and buying online was supposed to seal the fate of the big boxes. Now, it seems that “webrooming,” or browsing online but buying in the store, has become popular as an Accenture survey said that 78% of respondents they had “webroomed,” while just 72% had showroomed.

As the competition has intensified, many big boxes have lowered prices to match or beat Amazon, and several sources have reported that Amazon is no longer the default champ of rock-bottom online prices.

Where this is battle is going

Amazon has spent the last several years building out dozens of distribution centers near metropolitan areas to help it achieve its goal of same-day deliveries. But the big boxes already have a huge foothold in cities and suburbs, with thousands of stores that should present a potentially huge advantage over Amazon. Though, it may require a change in systems, it shouldn’t be very difficult for retailers to ship from stores as long as the economics justify it. Google Express has also taken on Amazon in the delivery race, and has partnered with retailers to offer same-day delivery to customers in some cities. A strategy like this one may be the easiest way for big boxes to undercut Amazon’s delivery proposition.

Traditional retailers still have a lot of improvements to make in the e-commerce space, but expect them to increasingly leverage their physical real estate in the battle against Amazon. While Amazon may offer a better online shopping experience, it’s not about to open a network of hundreds of stores to match the presence of its competitors. Therefore, companies like Wal-Mart can continue to use propositions like in-store pickup, ship-from-store, and others, as a selling point over Amazon and a way to keep shipping costs down.

In the coming years, the most successful retailers will have to become masters of the omnichannel. They will have to offer shoppers an equally rewarding experience both in-store and online, and be able to combine those capabilities for optimal delivery of the purchase, whether that’s in store or to the home.

Amazon will continue to grow as the e-commerce channel expands, but this surprisingly strong competition from brick and mortar names should continue to claw back market share. If that happens, questions about Amazon’s lack of profits will only loom larger, and the stock could take a major hit.

Jeremy Bowman has no position in any stocks mentioned. The Motley Fool recommends Amazon.com. The Motley Fool owns shares of Amazon.com. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has adisclosure policy.

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MONEY deals

Why You Should Be Shopping for Christmas Decorations Right Now

Customers browse Christmas decorations while shopping at a Home Depot Inc. store in Torrance, California, U.S.
Patrick T. Fallon—Bloomberg via Getty Images Customers browse Christmas decorations while shopping at a Home Depot Inc. store in Torrance, California, U.S.

Walk into pretty much any store that stocks holiday decorations this weekend and you're bound to bump into tremendous deals--easily discounts of 75% off or more.

Every price-conscious shopping strategist is well aware of how quickly and dramatically seasonal items go on sale as soon as the peak-buying period around a holiday is over. It’s tradition for holiday decorations to go on clearance sale immediately after Christmas, and sometimes even days or weeks before December 25.

But now that we’re a week removed from Christmas, shoppers can expect prices on holiday merchandise to plunge even lower. What this means is that this weekend is an absolutely optimal time to buy, provided you’re the type who 1) doesn’t mind sifting through haphazardly picked-over merchandise for treasures; and 2) will actually remember and keep track of this stuff when the time comes to use it 10 or 11 months down the road.

Here’s one indication of how prices have fallen even during the week after Christmas. The deal-tracking experts at dealnews highlighted a few of the best post-Christmas Christmas decorations sales at the end of last week. At the time, a 3.5-foot-high LED Yoda dressed up as Santa and holding an oversized candy cane, for example, was selling for $14.99, half off the original price of $30. By now, however, that same Yoda is marked down to just $7.50, or 75% off the retail price.

Unfortunately, you can’t order Yoda online, not even if the force particularly strong with you is. Instead, you’ll have to call up your local Home Depot and see if it’s in stock, or just head down and browse.

Likewise, shoppers can generally expect to find the lowest prices on decorations in the physical locations of other stores, including Sears, Big Lots, Crate & Barrel, and more, rather than online. At this point, it’s problematic for retailers to sell some of their discounted Christmas items online because inventories are so low.

As for what’s left behind in individual stores right now, it’s something of a crapshoot. Major retailers are desperately trying to unload these items to make way for the next season’s merchandise—the stuff they have a prayer of selling at full price—so it’s hard to tell in advance what you’ll find in the clearance aisles of each store location.

Depending on the item and the retailer, it is sometimes possible to buy ahead online and pick up at your local store. That’s the most efficient strategy for shoppers. Those who simply venture into a store to browse can also be assured that whatever leftovers they find will be dirt cheap. Here are a few options:

Big Lots: The discount retailer’s Christmas Clearance sale knocks 50% off all seasonal items, including lights, ornaments, trees, wrapping paper, and Christmas pet gifts. (“Selection varies by store,” Big Lots warns.)

Crate & Barrel: A winter clearance sale knocks off up to 60% on seasonal merchandise, and there are even deeper discounts on items specifically geared for Christmas, including this Glitter Twig Garland now priced at $8.98 (originally $29.95); many items are available for online purchase but the retailer warns “quantities are limited.”

Home Depot: 75% or more off a wide range of ornaments and artificial wreaths and Christmas trees, and much of it can be purchased online and then picked up at a store.

Sears: Up to 70% off artificial trees, holiday collectibles, lights, and indoor and outdoor decorations—much is available for purchase online with free shipping, though there may be even lower prices at physical Sears locations.

Target: 50% or more off holiday costumes, ornaments, decorations, and such

Walmart: A huge mixed bag of Christmas clearance deals, such as a Santa tree topper for $6.97 (originally $16.98)

Yankee Candle: 50% or 75% off seasonal items, with the biggest discounts generally available for Christmas-y goods like Balsam & Cedar ornaments

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