AP

(AP)

Malls Reel as Web Roars

Features Dow Jones Newswires

The stampede of shoppers to the Web grew more thunderous during the final days before Christmas, testing the limits of delivery services and pushing retail chains into deeper, longer promotions than their e-commerce rivals.

Even as the margin of error to have gifts comfortably arrive before the holiday melted, shoppers chose the Internet over a trip to the mall. Sales at physical stores fell 6.7% over the most recent weekend, while traffic declined 10.4%, according to RetailNext, which collects data through analytics software it provides to retailers. That is worse than the 5.8% decline in sales and the 8% drop in traffic recorded from Nov. 1 through Dec. 14.

The shift to online shopping is straining retailers and delivery networks. A few chains, including Eddie Bauer and Pacific Sunwear, warned customers this week that their holiday packages were delayed and blamed what they said were broader problems at FedEx Corp.

FedEx said Wednesday it is running operations round-the-clock to "accommodate additional unforeseen volume from some customers," but that its delivery network is "performing as designed for the forecasted volumes from our major retail and e-tail customers."

"If customers shipped prior to the published deadlines, we plan to deliver the shipment by Christmas," a FedEx spokeswoman said. Officials at Eddie Bauer LLC and Pacific Sunwear of California Inc. weren't available for comment.

Industry consultants who work with retailers said that both FedEx's and rival United Parcel Service Inc.'s networks appeared to be at capacity this week, and the companies were enforcing volume limits on some retailers.

A UPS spokesman said Wednesday the company's network is running about 98% on time, and that it has been able to accommodate more than 200 customers' requests for additional volume.

Even last-minute shoppers like Katherine Koepsell, a lawyer who lives in Beaver Dam, Wis., were going online instead of to stores. On Sunday, Ms. Koepsell realized she needed a few more gifts, so without leaving her bed she reached for her smartphone and ordered "Toy Story" stickers and Olaf-themed gloves from Amazon.com Inc.

"I can't wrap my head around having to pile the whole family in the car and then fight the crowds with the stroller, and what if they don't have what you are looking for?," Ms. Koepsell said of making a trip to the mall.

That has pushed some brick-and-mortar retailers to pull out all the stops to get shoppers in their doors. Kohl's Corp.'s stores opened at 7 a.m. on Dec. 17 and won't close until more than 170 hours later at 6 p.m. on Christmas Eve, a full two days longer than last year. Toys "R" Us Inc. stores will remain open for 39 consecutive hours, beginning at 6 a.m. on Dec. 23 through 9 p.m. on Christmas Eve.

Retailers have faced challenges this year that include unusually warm weather that has damped demand for coats, sweaters and other winter gear, as well as a decline in spending by tourists visiting the U.S. as a result of the strong dollar. Those forces have weighed on spending despite an improving job market and low gas prices, and have prompted some retailers to slash prices to attract shoppers.

"You're seeing companies run promotions for longer periods and deeper discounts on winter related apparel and accessories," said Simeon Siegel, an analyst with Nomura.

At Gap Inc.'s Old Navy chain, the entire store was up to 75% off through Dec. 28. Macy's Inc. was offering "after Christmas prices now," including coats at 50% to 60% discounts. And Abercrombie & Fitch Co. was discounting the entire store by 40% to 60%.

Online-only retailers, however, have pulled back on broad promotions in December, according to PwC research. "The leading online-only retailers aren't playing the big promotion game as much. They are using big data and tailoring personal curated items," to spur online shoppers to buy, said Steve Barr, retail consultant at PwC.

E-commerce sales rose 11.8% from Nov. 26 through Dec. 20 compared with a year ago, according to ChannelAdvisor Corp., which makes e-commerce software and measures online transactions. Forrester Research Inc. expects e-commerce to account for 14% of retail sales in November and December.

"There is a fundamental shift in consumer behavior under way," said Bayard Winthrop, the chief executive of American Giant, an online seller of made-in-America apparel. "This past weekend was very busy for us," said Mr. Winthrop, who says his company's revenue has more than doubled during the holiday season compared with a year ago.

Karen Gestwicki, a real-estate broker in Charlotte, N.C., said that normally she visits numerous stores during the holiday season, but this year she did most of her shopping at Amazon, where she bought a hoverboard and a Patagonia pullover, among other items. "It was just so easy," Ms. Gestwicki said, "and the prices were just as good, if not better, online."

According to RetailNext, shoppers who did trek to stores during the last weekend before Christmas spent more per visit than last year, but the last-minute rush likely won't make up for what is turning out to be a lackluster season.

Craig Johnson, the president of research firm Customer Growth Partners, estimates total sales are likely up 3.1% so far for the season, less than his prediction for a 3.2% increase. He is holding out hope that retailers can make up lost ground in the week after Christmas, when 10% to 15% of holiday sales occur, according to the National Retail Federation.

And in what could be a rare bright spot for retailers with physical stores, 47% of consumers polled by the NRF said they planned to shop in stores that week, compared with 43% who said they planned to shop online.

Write to Suzanne Kapner at Suzanne.Kapner@wsj.com, Sarah Nassauer at sarah.nassauer@wsj.com and Laura Stevens at laura.stevens@wsj.com

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