Another day, another price-matching policy announced to fend off the effects of Amazon.com (AMZN 1.30%), which continues to reshape the face of retailing.
Office supplies leader Staples (SPLS) becomes the latest store to say it will meet whatever price the e-commerce leader is offering, and it's no coincidence that it's happening as we move into the Christmas selling season. Like Target (TGT -0.36%) and Wal-Mart (WMT -1.75%) before it, which adopted similar policies last year just ahead of the holidays, Staples will have its price-matching program go into effect beginning on Nov. 3.
Staples' new omnichannel store layout. Source: Staples.com.
It certainly seems a wise decision, considering Amazon has been stealing sales from brick-and-mortar stores for years. Just as Best Buy (BBY -0.11%) was almost brought to its knees by the advent of "showrooming" -- the phenomenon of testing out products and gadgets in-store before firing up your smartphone to order the item online, often for less -- the electronics superstore ended up embracing the concept.
Others have followed suit, including both Wal-Mart and Target, both of whom have also adopted ship-to-store policies for consumer convenience, apps to allow for competitor price comparisons, and more closely intertwining the in-store shopping experience with the online one. The so-called omnichannel or multichannel shopping experience is all the rage.
It's a lesson Staples seems to be learning, too, as it rolls out new omnichannel stores that sport fewer SKUs in a smaller footprint, but puts kiosks on the sales floor to facilitate ordering from its online site along with associates who stalk the floors, tablets in hand, to provide customers with more product information and stocking data.
In an effort to cut costs and lower overhead, retailers have been shrinking the size of their stores while offering the majority of their inventory online. Best Buy was an early entrant when it unveiled its Mobile stores that were a fraction of the size of its superstores, but Staples rival Office Depot started trimming the floor size fat too, while Target recently announced it was joining the rush to "go small or go home."
In short, the retail initiative to fend off Amazon can be boiled down to some key components, all of which Staples is studiously replicating: reduced store size, expanded online offerings, price-matching guarantees, and ship-to-store policies to keep customers coming back. But while they have very real limitations imposed on them because of their brick-and-mortar footprint, retailers are discovering that the process works.
Whereas Target saw profits fall 13% last quarter and had to scale back its full-year outlook, it had more to do with its new Canadian operations costing more than expected than with a lack of execution. And everyone has only just finished back-slapping Best Buy CEO Hubert Joly for trouncing Wall Street's predictions. While in-store sales are still anemic, online sales were comparatively strong, with comps rising 10.5% in the quarter. Price matching may have nibbled away at margins a bit, but the electronics store sees it as essential for its business and has plans for expanding the practice.
Staples is fortunate in that it already has an impressive online presence, a site second in size only to Amazon in terms of SKUs. The transition to a more Internet-focused environment shouldn't sap the strength of the office supplies leader the way it has other retailers who needed to invest heavily to play catch-up, though it may nibble at Staples' margins just as it has elsewhere else.
Amazon, though, remains the straw that stirs the retail drink, and only certain competitors can effectively meet the challenge. With Staples' profitability, size, and unique competitive advantages, it should be one of those rare few to sip from the cup.
