Closeout Chain Tuesday Morning Gives Up On E-Commerce. And It May Have Been Right To Do So

When 829-store, $838 million closeout retail chain Tuesday Morning (NASDAQ:TUES) announced to its shoppers this week that it had shut down e-commerce sales—something it actually did last month—it raised questions about whether the chain was trying to turn back the HTML clock, opting for physical rather than online. But a closer analysis of Tuesday Morning's position suggests a different conclusion, that it's better to abandon e-commerce if the chain believes it can't do it well.

For starters, e-commerce has not recently played a meaningful role in Tuesday Morning's sales, barely representing one percent of the chain's revenue, the Wall Street Journal reported.  And Interim CEO R. Michael Rouleau told analysts—during the chain's most recent analyst call, back on April 26—that the chain is trying to focus on other issues. "The company over the years has not changed with the times. As a result, other off-price retailers have moved ahead of us. We have not made investments in infrastructure that are necessary to support a very large retail chain. For example, our IT systems need to be upgraded. Our merchandise supply chain is underdeveloped," he said.

More to the point, he said, e-commerce (and the Web in general, even as a brochure site for its physical stores) had issues. "Our website was not tied to marketing and, as a result, our ads and website did not tie together. This has been changed," he said.

The very nature of a close-out chain is not the best e-commerce environment, as TJX—which only got into U.S. e-commerce this year—knows well. The ideal e-commerce offering might be consumer electronics, in that shrink-wrapped packages of the same exact model are all presumably identical, allowing the shopper to sort by price. With close-out deals, there is a much greater need to examine the merchandise.

Also, by definition, inventory is much tighter in a close-out chain, which again is good for physical and bad for virtual.

Instead of this move being an indictment of e-commerce, it's more accurate to argue that it's a realistic view that if a chain can't invest in delivering an effective e-commerce experience, it's best to focus on delivering a top-notch in-store experience. If that works well, there will always be time later to bring back e-commerce and to do it properly. And if the in-store doesn't work? E-commerce, in that case, probably wouldn't have helped.

The Journal story accurately summed up the closeout e-commerce challenge, something some of the shoppers they spoke with didn't fully grasp. "Closeout and off-price stores, which keep prices down by buying excess inventory and off-season fashions, have been slow to embrace E-commerce," the story said. "Holding up progress has been the complication of fulfilling Web orders for a constant stream of one-time items and overruns that arrive every day from a patchwork of department stores and manufacturers."

But the story then quoted a 38-year-old woman calling the move a "very backward decision" in a digital world. "Brick and mortar is a dinosaur," said Amy Goldman. "I was working 60-to-70 hour weeks. I didn't have time to walk through their stores and then not find what I was looking for."

For more:

- See this Wall Street Journal story

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