The Changing Face of These Businesses

Is 2012 the year big box retail finally dies?

With the recent announcement from Sears Holding (Nasdaq: SHLD  ) that they will be closing 120 stores after a lackluster holiday season, and problems from Best Buy (NYSE: BBY  ) fulfilling some online orders, consumers should be questioning whether they will be spending next Black Friday waiting in line outside of their favorite big box retailer or whether queues online will be the new norm.

Smaller is better
Trends seem to indicate that small, niche stores could be where consumers begin to spend their money before moving completely online. Apple (Nasdaq: AAPL  ) , for example, reports sales per square foot nearly twice as large as second-place Tiffany & Co. Both of these retailers boast smaller store formats than traditional big box locations, and they are tops in their class.

And sales don't tell the entire story. On a recent visit to an Apple Store in the Washington, DC area, it was nearly impossible to navigate the store because of the amount of customers. However, Apple has great processes in place to ease customers through their purchases, eschewing traditional checkout lines for a bunch of "Geniuses" with payment-processing iPads.

Customer service is also taking on a renewed importance. Smaller stores, which generally spend less in overhead, can afford to spend the money hiring employees that are more knowledgeable about the products that they sell. If these smaller stores can continue to focus on customer service, it may slow the move of consumers to making all of their purchases online, instead pushing customers from larger format stores to more focused retailers.

Online -- the continuing wave
Continuing to lead the online retail wave is Amazon.com (Nasdaq: AMZN  ) , a one-stop online shop where you can purchase nearly everything. The Kindle Fire tablet, though sold at a loss, is a hub for loads of digital content, including e-books, movies, television shows, and games. Cyber Monday, the Monday after Thanksgiving, has truly bookmarked the Thanksgiving weekend, prompting many retailers to run separate promotions on both Friday and Monday, encouraging shoppers to both visit stores on Friday and the web sites on Monday.

Amazon does online sales right, including being ranked the best e-tailer this holiday season, scoring 88 out of 100 in a consumer satisfaction survey. Best Buy, on the other hand, recently struggled to fulfill online orders in time for Christmas, showing that an online presence doesn't equal online performance. Though Best Buy has attempted to rectify the situation by providing some affected consumers with gift cards, the impact of failing to ship could be felt going forward as customers go elsewhere after spending their free gift cards.

What this means for investors
Even though Best Buy and Sears Holding's best days may be behind them at this point, there are other retailers that still make great investments. In fact, one retailer has been anointed as "The Motley Fool's Top Stock for 2012." Start 2012 off right by signing up for this new special report by clicking here!

Fool contributor Robert Eberhard holds no position in any company mentioned. The Motley Fool owns shares of Amazon.com, Best Buy, and Apple. Motley Fool newsletter services have recommended buying shares of Apple and Amazon.com. Motley Fool newsletter services have recommended writing covered calls in Best Buy. Motley Fool newsletter services have recommended creating a bull call spread position in Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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