Staples Joins RadioShack on List of Retailers Feeling the Squeeze from Ecommerce
On Thursday, office-supply retailer Staples joined the crowd of brick and mortar retailers clearly hurt by a tepid holiday shopping season and competition from online ecommerce. But Staples' attitude appears to be "if you can't beat 'em, join 'em."
Just a day after RadioShack disclosed grim financial figures for the last quarter of 2013 and announced it would be closing down about a fifth of its retail locations, Staples released a similar quarterly report.
According to Staples' earnings statement (via AP), the company reported $5.87 billion in revenue for Q4 of 2013 (the holiday shopping season), which came up about $100 million short of expectations and marked about a 10 percent drop over the same time last year. Operating income for the same period represented a drop of 28 percent over the same time in 2012 as well.
The company's chief financial officer, Christine Komola, told an earnings conference call that much of the shortfall resulted from a shorter holiday shopping season, bad weather, a lack of Apple's new hardware on the shelves, and competition. "I want to be clear. We are disappointed about coming up short," said Komola, according to Forbes, adding that "competitive intensity during the shorter holiday season, as well as unfavorable weather" contributed to the disappointing results.
Competition from still-growing online behemoths like Amazon also continues to pressure brick-and-mortar shops, especially those that sell electronics like Staples and RadioShack. Just like RadioShack, Staples is hoping that closing some retail locations will help achieve cost savings. The company is planning on closing 225 of its 1,846 locations in the U.S. and Canada by the end of 2015, saving an estimated $500 million in costs.
But Staples, which closed 109 stores in North America and Europe in 2013, according to the Washington Post, also signaled it would continue to join the ecommerce revolution, competing directly with companies like Amazon and Walmart in cyberspace. "A year ago, we announced a plan to fundamentally reinvent our company," said Staples CEO Ron Sargent in a statement, according to Tech Crunch. "With nearly half of our sales generated online today, we're meeting the changing needs of business customers and taking aggressive action to reduce costs and improve efficiency."
As we previously noted about RadioShack's current woes, ecommerce is killing some retail sectors, and Amazon is the prime suspect. Whether its books, electronics, or the tech widgets that RadioShack was known for -- like A/V cords, converters, or DIY items -- Amazon's inventory scale and low workforce-to-sales ratio helps the world's largest online retailer out-price the brick-and-mortar stores most of the time. (This is also true for most ecommerce, but Amazon is the leading example.)
And while physical retail sales have slowly improved since the 2009 recession, Amazon's sales have inordinately outpaced brick-and-mortar year after year.
Staples has already increased the number of products it offers online over the past year, from about 100,000 to 500,000 this year, and the company says it expects to triple that to about 1.5 million items for sale online by the end of 2014. Staples (and retailers of its ilk) will have to do that -- and probably more -- as shoppers continue to vacate the malls and instead head online to snap up the best deals in their pajamas.
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