It’s always sad to see a business close its doors and leave behind a vacant storefront.
Well, almost always – depending on if the shuttered business personally wronged you in any way.
Over the last couple of months, multiple big-box retailers with a once-prominent presence here in Arizona announced they would be closing all of their locations. The notable closures include Southwest-based sporting goods franchise Sport Chalet and the Arizona-only furniture chain The RoomStore.
So, what caused the demise of these long-standing retailers?
Was it online shopping (ecommerce) options? Too many direct competitors? Failure to distinguish themselves from similar franchises? An economy that simply refuses to kick into the next gear?
It’s likely all of the above, plus another, less-talked-about factor I’ll examine a little bit later. First, let’s look at the particulars of these franchises’ final days, as well as some of the main influences that put them out of business.
Details on The RoomStore’s Closing
The RoomStore is currently having one of the more spectacular going-out-of-business bonanzas I’ve ever seen. Around the metro-Phoenix area, shopping center signs and cargo trucks have unabashedly been heavy on terms like “Liquidation” and “Going Out Of Business Forever.”
The company’s website impresses the sense of urgency even further, encouraging you to negotiate the price you want and that nobody beats The RoomStore’s going-out-of-business sale.
Um, are they excited to be going out of commission? The company even appears elated to point out that several locations have closed and the rest are shutting down soon.
The Room Store was actually founded in Texas in 1992, and it opened its first Arizona location a year later. When all of the Texas RoomStores began closing down in late-2012, the Arizona locations were immune, since they were owned by a separate company: The RoomStores of Phoenix, LLC.
At its height, The RoomStore owned 12 locations in Arizona, primarily in the greater Phoenix region. The company was perhaps most recognized locally as a long-time sponsor of the Phoenix Suns.
— Ronnie Laybold (@YotesHereToStay) January 24, 2015
Anytime I see the roomstore I automatically think suns
— YUNG STUNNA (@This_Just_in480) February 7, 2014
How to realize the basketball season is going on in Phx? Finding yourself humming the Roomstore commercial jingle randomly… Check #Suns
— Taylor Waymire (@TaylorWaymire) November 4, 2012
Ahh Roomstore commercials every 5 minutes… That’s how you know the Suns season is back.
— Johnny Hopkins (@Prof_JG) November 1, 2012
When The RoomStore filed for bankruptcy protection last December, it was a definitive sign that the local furniture empire was on its last legs.
Details of Sport Chalet’s Closing
Sport Chalet’s wind-down process has been much more somber. In April, the company sent an email to all of its subscribers announcing the end of the franchise. A version of that email is currently on the homepage of the website, which appears to be the only page on the site anymore.
You can’t even find which stores are still open through the website. The company has sent several follow-up, matter-of-fact emails that announce extensions of honoring customers’ gift cards and other similar notices. The retailer doesn’t appear to have any sense of urgency in enticing the consumer to visit a store and buy an item on discount before the place closes.
Founded in 1959, Sport Chalet at one point had more than 50 locations in Nevada, Arizona, Utah and, especially, California, where it was headquartered. The sporting goods chain is part of the Vestis Retail Group, which also owns Eastern Mountain Sports (EMS) and Bob’s Stores, all located in the Northeast. Vestis has filed for bankruptcy, but it is keeping most of its EMS and Bob’s Stores open while cutting out the fat that is Sports Chalet.
Too Much Competition for These Big-Box Retailers?
The RoomStore and Sport Chalet were both plagued by lukewarm and negative online reviews. For The RoomStore, complaints mostly concerned returns, refunds, sales tactics and even deliveries and the quality of furniture. For Sport Chalet, sky-high prices and poor customer service appeared to hamper the business most forcefully.
As a significant side note, if you’re going to survive as a brick-and-mortar store in today’s environment, you’ve got to offer an experience, not just lay out merchandise and hope somebody buys it. If you want to look within The RoomStore’s industry, it’s easy to see that the home furnishings giant IKEA offers a distinct shopping experience. Did The RoomStore offer a discernible experience, or did it simply (haphazardly) sling furniture?
If you’re looking at Sport Chalet’s industry, you can see that Dick’s Sporting Goods at least somewhat offers an experience, as each store maintains a locker room feel. Did Sport Chalet offer an experience? Do large photographs on the walls of various sporting activities make for an experience? The franchise initially started out with a focus on skiing equipment and later expanded to scuba gear, but after that, it tried to appeal to a wider audience, and it ended up throwing aside its unique selling proposition in the process.
Also, Sport Chalet wasn’t on its email and ecommerce game the way that Dick’s is. Personally, I was buying online from Dick’s Sporting Goods way back in the early 2000s. Lo and behold, several physical locations started cropping up around town just a couple of years later.
It’s obvious that Dick’s has a two-fold strategy to grow its business. Even if Sport Chalet’s ecommerce sales were vibrant, they weren’t enough to salvage the entire company, and apparently not even worth keeping as an online-only business.
Also of note is that Sports Authority recently filed for bankruptcy and later announced it is closing all of its stores. Same concept here: What was the Sports Authority Experience? Anybody? Bueller? Sports Authority was once the country’s largest sporting goods retailer, but like Sport Chalet, it will soon be no more.
What do these major setbacks mean for the great American sporting goods store going forward?
Did a Sluggish Economy Kill These Franchises?
Well, even if the economy is hurting – which it no longer seems to be, by most indicators – the furniture and sporting goods industries aren’t currently feeling the pain. Here are a few stats that tell the tale, as provided by the U.S. Census Bureau:
- Retail and food service sales are up 3.5 percent in Quarter 1 of 2016 from the same time period last year.
- Furniture and home furnishings store sales are up 5.6 percent in Q1 of 2016 compared to the same period last year.
- Sporting goods, hobby, book and music store sales are up 7.4 percent, one of the largest jumps in any retail and food service niche from Q1 2015 to Q1 2016.
So, even if retail is up this year and the furniture and sporting goods sectors are particularly doing well, those factors apparently weren’t enough to save franchises like The RoomStore, Sport Chalet and Sports Authority. You would think that even a higher-priced store like Sport Chalet, for example, would be able to survive as long as the economy’s in good shape and there’s enough consumer spending to go around, but alas, some businesses are still going under.
Truth be told, these franchises were hemorrhaging profits for years prior to the economy righting itself, but by the time it got better, it was too little, too late – and the writing was on the wall for these once-prominent retailers.
Did Ecommerce Sales Play a Role?
It’s always the elephant in the room every time a big-box retailer goes under: internet sales. Yes, online sales are becoming more and more common as the checkout process continually gets easier, but ecommerce still doesn’t take up as big of a chunk of the market as you’d think.
According to the chart below, ecommerce sales comprised only about 2.5 percent of all U.S. retail sales (adjusted) back in Q1 of 2006. The market share has continuously grown since then, rising to nearly 8 percent of all retail sales in Q1 of 2016.
— U.S. Census Bureau (@uscensusbureau) May 17, 2016
Yes, 8 percent doesn’t really seem like that much, but that still represents more than $92 billion in transactions in just one quarter of the year. It’s decisively large enough to play a role in putting brick-and-mortars out of business.
Overlooked Factor: Reluctance of Dealing with Sales Associates
Although online shopping is more convenient than ever, I think the issue goes much deeper when it comes to why big-box retailers are hurting. When shopping online, you can line up dozens of items side by side, check out their specs and then make your purchase with one or two clicks of a button, all without having to deal with a salesperson.
While it’s hard to beat physically trying out an item in the store, some might still say, “Why deal with a potentially incompetent, unhelpful or pushy sales associate when I can just buy the merchandise online.”
To some shoppers, it might be a diagnosable social anxiety disorder that keeps them buying their furniture, clothing and other merchandise from a distance. To others, it might be a conscious decision to avoid the hassle and wait that is latent every time you walk into a store – especially one like The RoomStore or Sport Chalet, according to many online reviews.
Many people spend more time with their face buried in their phones or computers than they do interacting with others face to face, so it’s no wonder ecommerce continues to grow. You could argue we’re being conditioned to do more interaction online than we do in “the real world.”
— Dragons Dont Die (@DragonsDontDie) May 17, 2016
According to a 2015 eMarketer forecast, Americans spent an average of 2 hours and 54 minutes each day on their mobile devices last year, and that doesn’t even count phone calls. That number equates to 44 days out of the year just spent on a mobile phone or tablet. The 2016 average is expected to jump to 3 hours and 8 minutes per day – again, not counting using a phone the old-fashioned way.
While some can juggle face-to-face interaction and heavy internet usage well, others cannot. If those who struggle with it are able to simply buy merchandise remotely, even if it means the item’s size or color might be askew once seeing it in person, then that’s a risk they’re willing to take. And let’s be honest, you can find some great deals online. Also, the online checkout process is usually easy and you’ll save gas by not having to drive to a store.
It all adds up to a significant threat to big-box retailers, which need to make sure their online sales process is as good or better than their in-store operations.
So, ecommerce sales, stiff competition and possibly the economy are all going to weigh heavily on brick-and-mortar retailers going forward, but I also think we shouldn’t discount the ever-increasing reluctance to social interaction. If someone can buy the same item online that they would otherwise have to walk into a store and deal with sales associates, especially a place that’s not known for its customer service, how can you convince them to buy from you on location?
We’d be interested in hearing your thoughts on why big-box retailers are going under as well as your ideas to keep them afloat. Comment with your opinions below.
Oh, and R.I.P. Sport Chalet, Sports Authority and The RoomStore.