First there was HP and Zellers, then Best Buy and SportMart. And now, Staples is the latest big box store to announce that they’re closing stores; 39 of the nearly 330 stores it currently has in Canada.
What’s the reason for the trend? Former employees and CEO heads of these companies can blame the Internet, and the influx in the number of people online shopping.
Staples has sent a letter to the 39 stores, as well as to real estate brokers, regarding its plans to downsize. Approximately a dozen of these stores have leases that will expire within the year, meaning that they could be closed at any time and Staples wouldn’t be responsible for any penalties. Two of the stores are owned by Staples, and it’s thought that the company will be sub-letting these to other stores in order to help offset costs and return a bigger profit.
Edward Sonshine, chief executive officer at RioCan Real Estate Investment Trust, a landlord of one of the buildings Staples is currently leasing from, says that he’s not surprised.
“It’s all generic products,” he says. “All these big boxes, these category-killer type of tenancies, were based on having the best prices and the largest selection. But once the Internet got more mature, you can’t have the largest selection any more and it’s tough to have the best prices.”
He even says that we can expect to see more of the same from other companies as they start to feel the online pinch, too.
“Eventually there will be a lot of downsizing,” he says.
The trend for shoppers to go online instead of searching different brick and mortar stores is going to force retailers to find different ways to turn a profit, says Michael Kehoe at Fairfield Commercial Real Estate Inc. in Calgary, a retail advisement firm. He says that brick and mortar stores will need to start offering hard-to-find products, and will need to rethink all of their strategies in general.
“This will be a turning point where we see large-format retailers looking for alternatives,” he says. “All large-format retailers are looking for efficiencies.”
