Small is beautiful! Staples axes stores AND space to make a comeback
It was the great Mitt Romney business success story - Staples the office supply superstore . Now one of the biggest retailers in the US has sounded “a worrying call” for the future of brick and mortar.
It's easy - just make the stores smaller!
Staples is not only closing 225 of its 1800 North American stores - it wants those left to be half the size.
The cuts scheduled over the next two years come after a weak Christmas. Executives now believe the Staples retail footprint is unsustainable, said the Wall Street Journal.
Last year Staples shuttered 40 locations and 40 stores were shrunk.”
Ron Sargent, Staples' chairman and chief executive, told analysts in a conference call, “ I want to make it clear that we're not getting out of the retail business. That said, stores have to earn the right to stay open."
Smaller stores should improve the company's profitability,Sargent said, because the rent costs half as much while maintenance, wages and other expenses are reduced.
Staples has found its 12,000 square-foot stores still sell nearly as much merchandise as stores that are twice the size.
Other US stores like Radio Shack and department stores like J.C. Penney are cutting back as increased online purchases and less foot traffic at malls bite into profits.
Retailers of electronics, appliances and office supplies are hardest hit because those items have moved online more quickly than other goods, reports Kantar Retail.
Staples is America’s second-largest online retailer by sales behind Amazon.
But "I go to a lot of stores and they feel too big," Sargent said. "We're going to be aggressively trying to reduce the size of all of our stores going forward."
Staples shares fell 15% to $11.35 on Thursday.
Meanwhile Staples has built out a large online operation offering office supplies to corporate clients.It has quintupled the number of items available online.
Internet sales accounted for nearly half of Staples' $23 billion in yearly revenue, the company said.
In the stores that remain, the company will change 1,000 of its worst-selling offerings for products like break-room supplies, office gifts and early education products.
The new products could muddle Staples' old identity as a one-stop shop for office essentials, said the WSJ, as some slow-selling supplies go online and the chain stocks more varieties of profitable items, like "organizational accessories"—such as binders and storage bins—that appeal to a wider audience.