STAPLES SHUTTERS MORE STORES

Another day, another category killer trims their store count. On the heels of Radio Shack's announcement earlier this week to close a chunk of their stores, the market brutalized Staples' stock on their move. It should applaud as Staples kill off marginal stores. Are you using as many pencils, binders and Post-It(R) notes as you did ten years ago? Are you paying as much for a PC as you did two years ago - if you buy one at all?

The market evolves and stores adapt. Closures play havoc with employees but they are also a sign of healthy responses to market conditions. Smart move, Staples. Over-reaction, stock market.

RADIO SHACK SHRINKS

   Retail is a dynamic, ever-changing universe. A&P was once the largest retailer in the world. Walmart was once a tiny five-and-dime compared to Ben Franklin stores. Chains like Home Depot and Staples and CVS barely existed 25 years ago. And don't get me started on fashion retailers like H&M which began in 1947 in Sweden and now operates in 53 countries. Kmart used to be the king of discount; now, they're the discounted king dragging venerated Sears to the bottom of the retail pond.

   Online retailing - or e-tailing - is definitely impacting their bricks-and-mortar brethren but mostly at the margin. The overall online numbers remain small - less than 6% of total retail sales in the US. Those marginal places where online is winning a bigger piece of the pie, however, have been books, entertainment (think iPod downloads) and electronics. And it's murder in those neighborhoods.

   The latest casualty is RadioShack which just announced the shuttering of 1100 stores, roughly 20% of their locations. Ouch. It's tough to live on the margin. Just ask Circuit City (d. 2008) or any of the thousands of mom-and-pop stationers, drugstores, apparel retailers, restaurants, gift shops, shoe stores and the like that have perished in this dynamic industry we call retail.

LIFE AT THE MARGIN

   It’s earnings season for many retailers who ended their fiscal years at the end of Jan. Results have been lackluster at best. Walmart, for instance, sold nearly $1,000,000,000,000 – that’s a trillion – in 2013.  (Of that amount, only $30 billion – about three percent – was online. Amazon did about $75 billion.) Though biggest in the world, Walmart's sales actually fell for the fourth quarter in a row in the US. Best Buy saw sales drop 3.5% for the year. JCP sales fell 7.4% after falling off a cliff (25%!) in 2012. Target saw sales slump 2.5% in 2013.

   Are people buying less? Nope – there’s simply more competition than ever before. It’s a tough world out there.

   Retailers may focus on margin but they also live on the edge. They don’t create demand; they fulfill demand. And they compete ferociously for every dollar. They win when shoppers come to them and become buyers, either online or in-person. They and the brand marketers from whom they buy strive to win shoppers’ attention and then their dollars. None of it is easy.

   Though online options draw much attention these days, the in-store environment remains where the game is largely won or lost. Do it well there and win; do it poorly and lose.  Stores are a high-stakes game.

   As they scrap for every penny and percent, shoppers benefit from that intense competition. Great store interiors, inviting environments, knowledgeable staff, ample supplies of the right products – these are the factors that spell success. The right packaging, displays and fixtures are key parts of that equation.  At the margin, it all matters.