by Eugene Zhelezniak '16
Last week, Staples, the Massachusetts-based office-supply behemoth, announced that by 2015, it will close 225 retail locations, or 12 percent of its total North American stores. The move comes as the retailer’s sales for the fourth quarter of 2013 dipped by four percent, bringing its total sales to just under 6 billion dollars.
Staples' decision to downsize is not something new. Last year, similar moves were made by typical mall retailers such as Macy’s, J.C. Penney, and RadioShack. All of these companies, although diverse in their products, suffer from the same malady— reduced foot traffic. And while slow economic recovery is certainly not helping, the Internet—and more precisely web-based retailing—only exacerbates the problem.
For years, the thought of clicking a button and having an item show up on your door step a few days later was both fascinating and objectionable. While purchasing anything online is admittedly very easy, one does not know exactly the quality or the fit of the item being purchased. However, times are changing, and fast. Earlier in 2013, the New York Times reported that for the first time in history, smartphone sales surpassed the featured phone sales, and will continue doing so in the foreseeable future. As the number of devices capable of internet access grows, consumers are not only becoming increasingly more connected—providing more on the spot product reviews and ratings—but are also becoming more accustomed to buying online and on the go. At one point, Amazon was the only major online retailer, and even then, it didn’t break even for a number of years since its inception. However, online retailing now is a vastly different landscape, with companies big and small doing anything and everything to capture the consumer’s attention.
In a world where everything is available at a tap of a screen or a click of a button, it is hard to attract people to your physical store, as Staples learned the hard way. The fact that Staples sells mostly office-based product doesn’t help either. It is easy for consumers to research products online, and order exactly what they need, when they need it, at the lowest possible price: all without ever setting a foot into a physical store.
In the future, the trend of buying and selling online will only increase in scope. As more advanced cell phones, tablets and state of the art devices, such as Google Glass, flood the market, retailers will see more of their revenue coming from online sales. The truth is, the bubble of foot-based retailing is slowly bursting, and if the companies are to survive the ripple, they must heavily invest in their online presence and concentrate their market focus. By focusing efforts on one type of product, they will be able not only to perfect their retailing model, but also offer the lowest prices. Foot Locker is a great example. By focusing on one type of product and strongly capitalizing their online presence, Foot Locker increased profits by 5.3 percent, well ahead of the expected 0.4 percent. As Foot Locker confirmed, it is this type of concentration that will strongly associate a product with a retailer in the minds of the consumers, which is absolutely crucial for survival in a marketplace where the barriers to entry are low and anyone can diversify their portfolio.
Sources:http://bits.blogs.nytimes.com/2014/02/13/smartphone-sales-beat-feature-phones-in-2013/http://www.washingtonpost.com/business/economy/staples-to-close-225-stores-by-2015/2014/03/06/168a2d58-a53b-11e3-a5fa-55f0c77bf39c_story.htmlhttp://online.wsj.com/news/articles/SB10001424052702304419104579325100372435802