Staples Is The Latest Victim Of ‘The Amazon Effect’

CREDIT: AP Photo/ Lynne Sladky

Staples announced Thursday that it will close more than two hundred brick-and-mortar stores in the United States and Canada, further proving that online sales determine retailers’ future.

After a lackluster earnings report showed online sales vastly outperform in-store purchases, Staples opted to close 225 stores by the close of 2015. The move not only saves the office supplies giant company money, but marks a new reality for big-box retailers.

Overall, Staples’ sales fell to about $6 billion by the end of 2013 — a 4 percent drop, according to a 2013 fourth quarter investors report. That, coupled with almost half of Staples’ sales coming from online, signals that retailers’ success is contingent on Internet sales.

The office-supplies company joins a long list of retailers that have struggled to keep pace with online sales giants Amazon and Walmart that offer products at much cheaper prices. Earlier this week, RadioShack made a similar announcement that it would close nearly 1,100 stores after huge profit losses. Best Buy has also continued to suffer huge revenue losses, and shuttered stores at the hand of Amazon.

This trend has been dubbed “the Amazon effect,” underscoring online retailers’ advantage over brick and mortar chains because of low prices and low staff costs. Amazon’s reliance on an underpaid, overworked skeleton crew helps keep prices cheaper than department stores. Amazon is also not required to collect sales tax on purchases, giving it a huge edge over brick and mortar competitors. Big-box retailers have lobbied for laws requiring online retailers to collect sales taxes, thereby leveling the playing field somewhat. Closing the “Amazon loophole” would also ease the burden of sales taxes on low-income families who don’t always have access to online retailers and brings in more money for states.

In January, Staples’ co-founder said that, to avoid failing altogether, “You have to go down there and fight in the trenches,” by re-configuring the long-term approach to look more like Amazon. Hundreds of jobs, including the employees who staffed the 225 shuttering stores, will likely fall victim to this new plan.

Closing more than 200 stores by next year will save Staples about $500 million, but the company doesn’t plan to completely abandon its physical store presence. Instead, Staples is shifting strategies, pushing individual office supplies sales online and focusing on supplying tech products and services to small businesses in-store.