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Big-box stores are in big trouble

Here’s one clear theme amid the latest flood of quarterly financial reports from leading retailers: The big-box store is in big trouble.

Experts have been debating the potential demise of big-box retailers for a while now. Those giant stores — some as big as 50,000 square feet — once crushed mom-and-pop retailers because they could sell commodity products in high volume very efficiently. Now the Internet is big-footing the big foot.

“They’re all dinosaurs,” said consultant Craig Johnson, president of Customer Growth Partners. “It’s a breed that has been vanishing in each [retail] sector. The idea of big-box superstores­ for a market that is shrinking just doesn’t make as much sense.”


Those new quarterly reports offer detailed pictures that illustrate the struggles of big-box retailers and the ways they are trying to adapt. Three specialty big-box companies in particular — electronics merchant Best Buy Co., office superstore leader Staples Inc., of Framingham, and bookseller Barnes & Noble Inc. — are all under the gun to some degree.

Best Buy, Staples, and Barnes & Noble face some serious problems that are specific to each one. But all are straining to manage millions of square feet of retail space in giant stores while more customers than ever buy online.

Most are trying to adapt by shrinking their outsize physical presence — an important but slow process. They are moving to smaller locations and subletting some of their big-box space to other retailers when possible.

Other common strategies: Add new but related products that will drive more customer traffic and boost sales. All continue to work on blending in-store retailing with online sales. The quality and scope of in-store service is a key to survival.

Among struggling big-box retailers, Best Buy has garnered most of the recent attention, for good reason. The company’s founder is so unhappy he wants to buy the business back; Best Buy just hired a new chief executive after his predecessor quit in April. The topper: Best Buy earnings plunged 90 percent in its most recent quarter.

Best Buy, once strong enough to outlast Circuit City, is getting clobbered online by Amazon.com. Apple Inc. operates much more successful stores. Even bigger big-box retailers, like Wal-Mart Stores Inc., are selling more electronics.


Since Best Buy just hired a chief executive, it doesn’t have a real turnaround plan yet. For now, the company is following the most common element in today’s big box playbook: Best Buy reduced its retail space by 4 percent over the past year.

The news at Staples is not nearly so dire. But the company’s sales fell 6 percent during the quarter, and profits slumped 28 percent.

Staples is struggling most with overseas business, not its US stores. The company already sells lots of supplies online, and it ranks second behind Amazon as an Internet ­retailer.

But sales and profit margins at Staples stores slipped during the quarter. The company closed five stores while it opened four during the quarter — another example of slow-paced space shrinkage.

Staples faces a second business challenge that’s driven by technology. The growing popularity of smartphones and tablet computers is slowly reducing demand for paper and copying supplies.

In turn, Staples is trying to add new product categories by selling break-room and cleaning supplies. Staples sees sales of those products growing faster than forecast, but most customers are buying online.

Barnes & Noble was one of the rare big-box retailers that managed to post higher quarterly revenues. Sales of actual books in stores — not e-books delivered online — increased 2 percent. But those store sales were boosted by temporary factors: the continued liquidation of defunct competitor Borders, and overheated sales of the steamy “Fifty Shades of Grey” trilogy.


Barnes & Noble knows it must become a viable digital competitor to Amazon and Apple to survive very long. The company is losing millions selling its Nook e-readers, but online content sales increased 46 percent in the most recent quarter.

I don’t know what a Barnes & Noble store will look like in the future. But I’m pretty sure it will be smaller.

Most big-box retailers won’t be able to survive in their big boxes.

Standing still and waiting for the economy to improve is not a viable strategy. But companies that can adapt — probably with smaller stores, broader merchandise, and better service — can still make it.

Steven Syre is a Globe columnist. He can be reached at syre@globe.com.