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. 

SEAMLESS RETAILING

   Global consulting company Accenture just came out with research that documents what we’ve been saying for years: online and in-store are converging as shoppers demand bricks-and-mortar stores evolve to provide the benefits of online and vice versa.

   Specifically, the report highlights these insights:

1.    Online Experience In-store: More people are buying online but picking up at a store.  Some are also ordering in-store and having delivered to their homes.

2.    More Webrooming, Less Showrooming: The study found that 78 percent of U.S. shoppers had webroomed (browse online then visit a store to make their purchase) in the 12 months before the latest survey, while 72 percent had showroomed (visit a physical store to see a product and then search online for a better price and make  purchase online).

3.    Free Beats Speed of Delivery: Though people have expectations of faster delivery, 57% of respondents preferred to wait rather than pay for next-day service.

4.    Retailers Aren’t There Yet: Survey respondents noted that they find offerings vary too much between online and in-store.  Retailers who figure this out – and many are working feverishly to do so – may enjoy a competitive advantage.

   As Chris Donnelly, global managing director of Accenture’s Retail practice, says, “Delivering a seamless experience across all retail touch points remains both a key challenge and prime opportunity for retailers today.”

   As long as shopping remains a vital part of the American economy, retail stores will, too.  Those retailers that deliver seamless shopping experiences - whether from one's phone, PC or shopping cart in an aisle - will remain vital to American shoppers as well.

RETAILING 2020

   Mark Twain was a rock star of the late 19^th century.  Unlike today where any star can be continually tracked through technology, people didn’t have the same access to their idols.  As he aged and infrequently spotted in public, gossip swirled that Twain had died.  He famously remarked, “The rumors of my death are greatly exaggerated.”

   Rumors of retailing’s demise continue to be greatly exaggerated as well.  Amazon, the great bricks-and-mortar slayer, just reported sales and earnings on Thu.  Sales grew 20% in the 4^th quarter of 2013 but earnings were less than 1% on sales.  The market punished the stock by sending it down 7% overnight because they aren’t making much money with their business model. 

   The world’s largest furniture retailer sees their future in-store.  Though IKEA started as a mail-order company, had 10 million new app downloads last year and saw online sales grow 20%, chief executive Peter Agnefjall says, "I think that in 2020 the absolute majority of sales will still be in our stores."  http://lnkd.in/drYKMCC.

   People still want to touch, feel, smell, taste and more fully experience many products before they buy.  Shoppers buy more when they can engage more of their senses.  That’s why the best retailers see that it makes sense to engage and enthrall shoppers, something that cannot be completely accomplished online.

   By 2020, new retail formats and technologies will emerge.  Many retailers of today will perish by then, especially those that fail to choose the right merchandise, the right messages and the right ways to deliver them to an evolving consumer landscape.  I predict without fear that that new landscape will include many great new retail stores.

IN-STORE WILL BE MORE LIKE ONLINE

   Think of your favorite store.  Do the people who work there know you?  Bet they do - and that's partly why you like to shop there.  My daughter loves our local Subway because they always know that she’s “six-inch Italian chicken breast toasted with lettuce & lite mayo.”  They know her.  And that’s part of the reason we like online shopping.  We share information online and feel amazed that they know what we’ve bought before, what others like us have bought and when we have a birthday!  Duh.  They capture and leverage information.

   In-store experiences will become more like online – interactive and personalized – as we get comfortable sharing more information and doing so becomes seamless.  Imagine someone greeting you in a store with a tablet that includes, with your permission, your recent online searches, purchase history, sizes, preferences, etc.  They could help you successfully find and purchase goods.  Shopping becomes better.  Everybody wins.  

   The technology is already available to make these in-store experiences more online-like.  Barriers are (a) retailers investing in equipment, (b) staff training and (c) shoppers getting comfortable with the intimacy.  Since we already share much online, notwithstanding Target’s recent security breach, and we actually appreciate feeling like we matter to the store associate, I don’t see the last one stopping in-store shoppers from having in-store experiences that rival – or exceed – the best online shopping experiences.

   What examples are YOU seeing of in-store becoming more like online shopping?