Retail Chains Close Stores Amid Online Competition

March 7, 2014

By Brenda Flanagan

Call it a seismic shift — consumers switched their shopping habits — and the shock waves hit retailers hard. Children’s Place will close 125 stores. Staples will close 225. RadioShack will shut down a whopping 1,100 stores. What made RadioShack radioactive?

“Actually I haven’t shopped there in a really long time. When I did, it was electronics,” said Maria Guevara. When asked where she shops now, Guevara said, “Best Buy. Walmart.”

Low prices, high overhead and easy online access are reshaping the marketplace.

“You see Barnes & Noble are re-thinking their big large stores,” said Chuck Lanyard.

The Goldstein Group’s Chuck Lanyard ticked off some casualties on his firm’s mural of retailers. He says big box stores struggle to compete with online businesses.

“Total overall sales have shifted to this 15 to 18 percent on the internet. And they don’t need as much bricks and mortars, which is very costly as far as overhead is concerned,” Lanyard said.

The big shift to online shopping cut deeply into profit margins at traditional brick-and-mortar stores. So did bad weather and a weak economy, but so-called “saturation marketing” didn’t help either. Consider Staples.

You can find five Staples stores within a five-mile radius in Paramus. That many stores costs too much, says Integra’s Ray Cirz.

“A typical Staples store is about 22,000 square feet. So that’s a lot of square footage. Rents are pretty high in northern New Jersey and they just can’t afford to continue to operate. They become unprofitable,” Cirz said.

“It made sense then, but now with internet, now with overhead and now with the attitude we have to be leaner and closer in an ever changing world. Retailers are looking differently,” said Lanyard.

“So many retailers have gone out of business. The list is long in New Jersey. We have Daffy’s, Fortunoff. And even though there’s some tenants that are taking their place, they’re not happening quick enough to fill the gap being created by all the stores closing,” said Cirz.

Realtors note smaller stores like RadioShack should find new tenants more easily. Often, service-oriented businesses — like medical offices — rent the vacant spaces. And in North Jersey, at least, retail space doesn’t sit empty for too long.

“A retailer wants a lot of people, a lot of households and a lot of money — with good family incomes — and that’s what New Jersey provides,” said Lanyard.

But economists warn the marketplace shakedown will continue for a couple years at least. Expect more retail chains to fold.