Bricks Versus Clicks
Staples’ decision to board up 225 stores in North America by the end of next year (more than 10% of their stores)—on the heels of Radio Shack’s announcement that it was shutting down 1,100 US stores—has the industry buzzing. (It's gonna be a lot harder to find legal pads.)
There are 13 Staples locations in the Lower Mainland. Stores have to “earn the right to stay open,” Staples chairman and CEO Ron Sargent says. Agreed, says CBRE SVP retail Tom Balkos, above. While there’s been plenty of chatter about the impact that e-commerce is having and will have on stores—bricks versus clicks—the Internet is not the death knell for the retail experience at all, Tom says. There are product categories that people would just rather buy online; they don’t need the touch and feel. (You don't need to try on a cordless mouse... it always fits.)
One is paying for the experience of shopping at a retail location, as well as the actual product, Tom adds. Chains like Staples, which does nearly half of their business online now, are “optimizing their network, assessing the cumulative effects of online shopping” amongst other location considerations like cannibalization and relo opportunities. For those retailers who want to compete with Amazon, it’s up to the bricks-and-mortar guys to up their game. “It’s about delivering a compelling in-store experience,” so the shopper doesn't hesitate to buy there, Tom says.
An interesting angle is how a retailer determines what kind of store they add to a market like Canada, says Colliers VP James Smerdon—a market that some analysts say isn’t the new horizon for retail that it was two years ago. “The pace of change in retail channels is picking up speed,” James says.
Yet retailers in categories that are experiencing strong shifts to online shopping that enter new markets like Canada with a “business as usual” mindset might find themselves sitting there “with shiny news stores that are part of an outdated delivery system.” (See: Best Buy, 2013). Those stores are seeing the need for more of an online focus and perhaps open smaller “service centres” in the new markets.
Vancouver-based retail consultant David Ian Gray says the Staples and Radio Shack announcements are part of a healthy contraction going on in the industry, the result of over-expansion of stores mostly in the US. (There's just not as much demand for digital cameras and three-ring binders anymore.) Canada’s economy has been better, so the impact of that hasn’t been felt as much up here. “There’s pressure in retail to show growth,” David says. There are incremental sales when you open stores, but that can only be supported for so long. The mounting shift to online sales in some categories only exacerbates the problem, David adds.
