Time for another round of Spot the Generational Differences. You know how this goes. We read you a recent news item, you choose the response that most closely matches your thinking.
News item: RadioShack plans to close 1,100 stores, or 20 percent of the retailing chain’s total, in an effort to stem losses in the millions of dollars.
A) This isn’t the passing of an era — RadioShack’s era was long gone. Haven’t bought consumer electronics stuff in a store in years.
B) This isn’t about RadioShack, it’s about retailing. We were over-retailed before the Internet hit.
C) This isn’t about retailing, it’s about RadioShack. Those retailers who know their niche and stay relevant are doing just fine.
D) I know what a “shack” is, but what’s a “RadioShack?” Or “radio?”
E) What’s a store?
Just as a strong economy tends to paper over shoddy operations and bad decisions in specific industries and individual companies — hello, mortgage lending circa 2005 — so does a recession tend to obscure long-term problems unrelated to an economic downturn.
The home-building and building-products industries, for example, got clobbered about as badly as any by the recession. But the fundamental industries are not going away. People will still want houses, once they can afford them again. You can’t live — not literally, anyway — on the Internet.
But you can shop, or get information, on the Internet, which is why retailing and media are prime examples of industries that would be struggling even if there hadn’t been a Great Recession.
For that matter, retailing might be struggling even if there wasn’t an Internet. The industry is always prone to bouts of too-aggressive expansion, and it’s always at the mercy of changing consumer tastes. If you’re a retailer dependent upon one style, one trend or one narrow segment of the market, you can be riding high in April, shot down in May. That’s life, retailing style.
But the Internet is fundamentally changing the game for some retailers. Office supply chain Staples recently said it will close another 225 stores, on top of the 40 it has already shuttered. The company is seeing more business shift online; those stores it does open are likely to be smaller than existing locations.
In some quarters there’s not going to be a lot of sympathy for Staples, especially among independent office-supply retailers, since the Internet (primarily in the form of Amazon) is doing to the big-box chains what those stores did to them. Now it’s Staples turn to experience the dramatic transformation of its customers’ shopping habits and patterns, and to face the stark choices: Adapt, change or wither away.
There’s one more big piece of recent retailing news to go over and try to fit into the bigger picture, one that has even more local impact than the RadioShack and Staples items.
Grocery store chain Safeway is being bought by the private equity firm that already owns Boise-based Albertsons.
This is not an Internet-driven combination. Despite some ventures and experiments at online grocery retailing (including both Safeway and Amazon), a real-world trip to a physical grocery store is one of the last bulwarks of bricks-and-mortar retailing. Nor is it driven by economic cycles. A recession might change how much people spend in the store or what they spend it on, but they still need to eat.
Safeway and Albertsons have a problem of operating in a thin-margin business crowded not only by giants such as Kroger (parent, in this region, of Fred Meyer and QFC), Costco and Walmart but smaller regional, specialty and niche grocers, too many to count.
That makes this statement in the recent announcement curious: “No store closures are expected as a result of this transaction.”
That would go against the tradition of virtually every merger in the history of mergers. Why go through the bother, not to mention the financing, if you’re not going to cut costs by closing redundant stores? It makes even less sense when considering the participants in this particular combination; Safeway and Albertsons occupy roughly the same segment of the grocery business, and in the Northwest often occupy virtually the same real-estate parcels.
No store closings? We’ll believe it when we don’t see it.
What we do believe we’ll be seeing is more turmoil, more announcements of combinations and downsizing and closings, in both physical and online retailing. The retailing industry can always count on people needing or wanting to buy things. That little matter of constant changes in what they buy, and where? Count on that too.
Bill Virgin is editor and publisher of Washington Manufacturing Alert and Pacific Northwest Rail News. He can be reached at firstname.lastname@example.org.