Weakening Obama Economy Not Given Proper Blame in Press Accounts on Retail Rough Patch

In the past week, Radio Shack has announced that will close 1,100 stores, or over 20 percent of its U.S. outlets. Staples is shuttering 225 stores, or roughly 12 percent of theirs. Smaller downsizings earlier this year have been reported at Macy's (involving store and other personnel) and J.C. Penney.

One gets the impression from press reports that these are occurring primarily because of poor management or the ongoing trend towards more online sales. Though those two factors are obviously relevant, the fact that the economy began weakening during the fourth quarter, especially so in December, rarely gets a mention. When it does get noted, it's usually something mild, along the lines of "disappointing holiday sales." A Thursday afternoon Associated Press article by business writer Tom Murphy illustrates the kid-glove approach (bolds are mine; my responses to certain of Murphy's points are in italics):


STAPLES TO CLOSE 225 STORES AS SALES MOVE ONLINE

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Staples has become the second major chain to announce the mass closing of stores this week, providing the latest evidence of how the retail landscape is being remade by shifts in American shopping habits. (i.e., it has nooooothing to do with the weak economy, even though fourth quarter GDP growth was knocked down to an annualized 2.4 percent from 3.2 percent, and even though the well-respected research firm Macroeconomic Advisers estimates that "Monthly GDP declined 0.6% in December.")

The nation's largest office-supply company said Thursday that nearly half of its sales are now generated online, and it is working aggressively to cut costs and become more efficient. It aims to close more than 10 percent of its North American stores by the end of next year, up to 225 stores, as part of a plan to save about $500 million.

Staples Chairman and CEO Ron Sargent said his company's stores have fallen short of expectations over the past three years, and the company launched a plan last year to "fundamentally reinvent" Staples. (Well, the economy has also consistently fallen short of expectations over the past three years. Unfortunately, there's no move to "reinvent" the government's stagnation-producing economic policies.)

... Two days ago, RadioShack, which is fighting to update its image, announced plans to close up to 1,100 stores, about a fifth of its U.S. locations, after its losses widened during a dismal holiday season. (Note that this is the only mention of Christmas shopping; while Radio Shack's Christmas season was awful, it wasn't particularly good for anyone except for certain clothing retailers.)

The recession did heavy damage to chains like Staples, and competition from discount stores also hurts. But online sales are affecting brick-and-mortar stores across the retail sector, no matter if the company is selling clothes, books or electronics. (This has been going on for years, and this year's online sales growth showed little evidence of acceleration.)

Shoppers are buying online more, and they're also window shopping virtually, so they are making fewer store visits, said Bill Martin, co-founder of ShopperTrak, which tracks data at about 40,000 U.S. stores. He said that's part of the reason the number of stores is contracting even though overall sales are growing, albeit at a slower pace. (Online sales are on the rise, but their growth from what is still a relatively small base doesn't explain how a generally well-run company like Staples has suddenly concluded that it has to shutter so many stores.)

"I think it's pretty clear that the consumer is evolving and might be evolving at a little faster pace than retail," he said, noting that shoppers can now use smartphones to compare prices during a store visit.

Staples Inc. has already shuttered dozens of its North American stores in the past year and said it will close up to 225 by the end of 2015. The company would not elaborate on the number of jobs being cut in the latest round of closings, nor the locations of stores that will close. It has 1,846 stores in North America and Canada, the vast majority in the United States. (It wouldn't have been hard to estimate that the average Staples store has roughly 20 employees, and that the closures will cause the loss of about 4,000 jobs. But I guess Murphy didn't want to disturb the happy-go-lucky "online evolution" narrative.)

... In the subcategory of office retail, there is a rapid consolidation taking place, both in physical presence and among one-time rivals. Staples has cut the size of its typical store in half over the past several years. Last fall, with sales flagging, rivals Office Depot and OfficeMax completed a $1.2 billion merger.

Unlike Staples, Radio Shack's problems appear to be with a business model which needs serious work. The chain's job losses are probably in the neighborhood of 6-8 employees per shuttered store, meaning at the very least that another 6,000 jobs are going away.

Staples has also more than likely been hit hard by costs relating to Obamacare. It now restricts the weekly hours of part-timers to 25 or below — a move which caused one alleged Staples employee to generate an ignorant change.org petition telling the company to "comply with the law."

Memo to "Sue Whistleblower": The company is complying with the law; you just don't like the way it has chosen to comply. It's not unreasonable to believe that Obamacare's cost structure effects may have caused Staples and other retailers to close even more stores than the miserable economy alone would have dictated.

Cross-posted at BizzyBlog.com.

Tom Blumer
Tom Blumer
Tom Blumer is a contributing editor for NewsBusters.