At a store on the southwest corner of New York’s Central Park, signs blaring “Everything must go!” and “Nothing held back” were put up overnight, confirming that Borders had entered its final chapter - and that U.S. retail was beginning a new one.
The loss-making book chain was sent into liquidation this week and its going-out-of-business discounts, flagged in big yellow letters on Friday, dispelled the usually cozy feel of its Columbus Circle store.
The previous day several lunchtime customers had nestled into its quieter corners: a woman browsing the religion section with a bowl of water for her dog; a man splayed like a sun-bather on the floor of the events zone.
Borders’ role as a home-away-from-home is one reason why its extinction has been greeted with sadness. But the company’s demise - leaving Barnes & Noble Inc. as the U.S.’s only national book chain - is about more than the end of an era in books.
Three decades ago, the rule of thumb in U.S. retail was that there was room for three big players in each product category. “Good, better, and best,” as Walter Loeb, a veteran retail consultant, recalls.
But today, so a new theory goes, each category has room for just one specialist chain, competing with Amazon.com Inc., the world’s biggest online retailer by sales, and Wal-Mart Stores Inc., the dominant mass merchant whose low prices yielded $260-billion (U.S.) of U.S. sales last year.
Following the collapse of Borders - a victim of online shopping, the e-book and a dose of bad management - the book business now fits this model.
It points more broadly to the slow death of diversity across big retail, a process that has been accelerated by the U.S.’s seemingly unshakeable economic funk. With that come questions about which category will be next - and whether any can escape.
Consumer electronics, another of Amazon’s strengths, went down to one national chain in 2009 when Circuit City went into liquidation, leaving struggling Best Buy Co. Inc. in the top spot.
In music - first sold in hard copy online and now easily digitized, like books - not even one national chain has survived.
“We’re in a ‘no excuses’ environment,” says Faye Landes, managing director of Consumer Edge Research. “Amazon and then the recession mean there is not much room for people who aren’t good at retailing.”
The broadening range of goods online and people’s growing comfort with e-commerce is well known: that is why online sales are growing at or above 15 per cent year-on-year, reaching $46-billion, or 4.5 per cent of all retail sales in the first quarter, according to Census Bureau data.
The limited spending of all but the rich is also obvious. Steven Burd, chief executive of Safeway Inc., the grocery chain, said this week: “My gut basically splits our customers as about 25 per cent ‘recession’s over with, times are good, spending as they always did.’ And then the other 75 per cent ‘really very cautious and very concerned.’”
Even Wal-Mart cannot feel secure. It accounts for $10 of every $100 spent in U.S. retail, according to Euromonitor, but its sales have slipped in each of the past eight quarters. For some consumers, two other big box merchants, Target Corp. and Costco Wholesale Corp., fill Wal-Mart’s shoes.
What’s also new - thanks to smart phones and comparison shopping sites - is that consumers are better informed, more canny and more eager for bargains than ever.
The category where the next victims are most likely to fall is office supplies, where Office Depot Inc., Staples Inc. and Office Max toil on.
“It seems to defy logic. You’d think that’s one of the most commoditized industries,” says Sucharita Mulpuru, retail analyst at Forrester Research. But years of competition with Wal-Mart may have pared them down to a “hyper-efficient model” early, she says.
Then there is sporting goods, home to Dick’s Sporting Goods, Hibbett Sporting Goods Inc., Foot Locker Inc. and Sports Authority. They were once shielded by the belief that consumers would not go online to buy anything they wore. But that has been proved wrong.
“Look at shoes,” says Ken Berliner, president of Peter J Solomon, a boutique investment bank. “It has the highest number of styles, colours and sizes of any category; everyone’s feet are different; but even so, Zappos [acquired by Amazon in 2009]has been incredibly successful online, continuing to take share from brick-and-mortar retailers.”
Groceries is one category where the U.S. is not expected to see an online retailer such as the U.K.’s Ocado, because selling perishable goods is too difficult and expensive outside high-density cities. Both Wal-Mart and Amazon are doing tests, but they have not found a profitable model.
For other bricks-and-mortar retailers, the outlook is not unremittingly bleak.
Leon Nicholas, senior vice-president at Kantar Retail, a consultancy, says that if diversity is dying, it is only among the bigger stores: “What we’re seeing is a more fragmented, postmodern sort of marketplace, where shoppers slide across channels and retailers.”
There is still demand for small stores that are quirky or localized. Among bigger stores, most analysts say the winners will be those that make shopping more than a chore.
“Consumers want to be entertained as they shop,” says Mr. Berliner. “Better retailers create an original and exciting store experience. They understand how to entice people into their stores and make them feel good about purchasing their goods.”
The leading examplar is a technology company: Apple Inc.
Its stores are so admired that J.C. Penney Co. Inc., a department store, has recruited the man behind them, Ron Johnson, as its chief executive. They have even been cloned - transparent staircases and all - by ambitious fraudsters in China, as an expat blogger revealed this week.
It is a painful irony for Borders that, with its comfy corners and knowledgeable staff, it scored high marks on the experience scale. But the forces massed against it were too much.
Follow us on Twitter:
- Barnes & Noble Inc$12.53-0.27(-2.11%)
- Amazon.com Inc$673.54+8.74(+1.31%)
- Wal Mart Stores Inc$58.82-0.03(-0.04%)
- Best Buy Co Inc$31.02-0.76(-2.39%)
- Target Corp$72.54+0.04(+0.06%)
- Costco Wholesale Corp$161.33-0.09(-0.06%)
- Office Depot Inc$6.57-0.02(-0.30%)
- Staples Inc$12.15+0.08(+0.64%)
- Dick's Sporting Goods Inc$39.20+0.17(+0.44%)
- Hibbett Sports Inc$32.02-0.80(-2.42%)
- Foot Locker Inc$65.53+0.53(+0.82%)
- Apple Inc$118.05-0.25(-0.21%)
- J C Penney Company Inc$8.06+0.09(+1.13%)
- Updated December 1 11:39 AM EST. Delayed by at least 15 minutes.