For Staples fiscal fourth quarter, which ended February 1, the business’s total retail sales fell about 10.6 percent to approximately $5.9 billion. The business has faced increases in stock and issues with retail overcapacity. Because of this, Staples missed its sales and profit projections.
To help solve some of those issues, Staples is doing many things, such as focusing extra efforts on ecommerce. This invigorated ecommerce campaign, may offer a few lessons or concerns for the online retail business and new ecommerce entrepreneurs who might be considering opening an online retail shop.
To help solve some of those issues, Staples is doing many things, such as focusing extra efforts on ecommerce.
While interpreting these classes from Staples’ actions will require some speculation, here are a few of the things worth considering.
Ecommerce May Cost Less and Be Changeable
Brick-and-mortar retail may have a relatively large cost of entry since merchants will need to lease or purchase buildings, order equipment and fixtures, hire workers, and outfit the place with stock.
In good times, these places are well worth the investment, but they can also become costly when purchasing habits or conditions change.
In Staples case, the requirement for its office equipment and supplies was waning, but it had been forced to keep open something like 1,800 shops — some rewarding and some not — leading to a office supply retail oversupply.
Staples physical shops might also have been subject to changing place dynamics. Maybe, competitors opened new shops near an existing Staples place, or perhaps a retail neighbor who was contributing to shopping centre traffic closed or moved elsewhere. Even changes in streets or new home building can have an effect on retail store locations, which then aren’t easily adapted.
In actuality, doing exactly what Staples is proposing, intelligently and systematically shutting some places, is most likely the best thing that the company can do to answer the company changes and challenges it faces.
The takeaway here might be that in today’s retail environment, ecommerce is less costly and more elastic than is the brick-and-mortar station, meaning ecommerce investments could be risky in the current rapidly changing retail environment.
Even retailers dedicated to having physical shops may use ecommerce to test places or areas. By way of instance, as opposed to spending thousand to rent space in a mall for five or ten years, a merchant might test out the place for six months with a kiosk that comprised a couple of select items and iPads that reveal the merchant’s full product catalogue. This evaluation kiosk could even provide free overnight delivery for catalog products, and provide insights about mall traffic and customer buying behaviour that demographics couldn’t have.
Similarly, retailers can test new product lines online first before investing in square footage. Staples stated that it must alter or add to its product offerings. Some of those new products will appear in physical stores, but other lines could be analyzed online first.
If Staples activities are being translated correctly, the company is stating that ecommerce costs less and is more elastic than its brick-and-mortar counterpart.
Ecommerce Can Provide Better Customer Satisfaction
Ecommerce may provide better client support and satisfaction compared to brick-and-mortar shopping experience for some product categories.
Staples doesn’t sell sexy products. Pens, paper, printers, and the like are not typically the fodder of emotionally driven consumerism. Folks do not often enjoy going shopping for office chairs, waste baskets, or office cleaning essentials, which have been recently featured on the Staples home page.
Staples.com prominently features office cleaning supplies on its home page.
Bearing this in mind, online orders may actually provide a better shopping experience. Shoppers who only need coffee filters for your break room and pens to your accounting department, should find purchasing online far more suitable.
Likewise many office supplies are considered commodities, so that shoppers may want to have the ability to compare prices online before determining where to find file folders or record storage boxes. Why, in that context, would someone want to see a physical store?
Staples, which is also adding to its business-to-business sales force, seems to be suggesting that customer support isn’t confined to physical places.
Online Price Competition Is Stiff
To reevaluate the point made about client comparing prices online that has been cited in the preceding section. Staples actions may also demonstrate that online price competition is extremely stiff and retailers will need to find ways besides simply price to distinguish online.
This is what Staples CEO and Chairman Ron Sargent stated in response to an analyst question about pricing.
“It is far more about the value proposition versus rigorously the price. We’re going to keep on sharpening pricing in plenty of important categories to make sure that we in the fair assortment of online competition. … I don’t believe we must be the cheapest price on all things, but there are quite a few different things which are important to clients. Things like free next day delivery with no minimum order size [or] five percent back for Rewards clients,”
Faced with changes in product demand, place dynamics, and customer buying behavior, Staples announced that it would close about 12 percent of its stores by the end of 2015.
The business might also have reminded retailers which ecommerce, with its promise of reduced costs, adaptability, and wonderful customer service, is very important for the future of retail and is an opportunity for new entrepreneurs.