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The Clicking Point

March 24, 2014

You’ll hear lots of conversations this market week about new products, old people and pretty much everything in between. Enjoy them for what they are, but the real talking point is going to be about the retailing industry crossing a seminal threshold.

The real talking point is that the business model the industry has operated under for the past 100 years is finally coming to a close. Physical, brick-and-mortar stores (steel and plastic, to be more accurate), as we know them, are on an inevitable and irreversible decline.

No, we’re not talking about online replacing instore or even virtual e-tailing getting anywhere near the 50% market share point. That is still many shopping years away, and frankly, it may never happen.

But we’re starting to see large national retailers, both in the home space and outside, increasingly shifting their focus to their online businesses and closing stores at unprecedented rates.

This is not about retailers like Radio Shack — which last month said it would close 1,200 stores — or Sears — which has been running its going-out-of-business-sale since the day Fast Eddie Lampert bought the joint. Those are sick businesses practicing triage and trying to stay afloat.

Look instead to a retailer like Staples, the largest player in the office supply business and a generally healthy, prosperous retailer. It announced it was shutting 225 stores this year, while continuing to maintain its remaining 1,600 stores.

This is a benchmark announcement and it signals that the American retailing industry is starting to realize how it will need to do business going forward. Staples is ahead of the curve because it says it now does about half its business online.

That’s a remarkable percentage and other than Williams Sonoma – which had a well developed direct-to-the-consumer business before the Internet came along — you’d be hard pressed to come up with many other multi-channel retailers with an online share of business that high.

But others are moving toward those ranges and that’s why in your conversations this week you need to be listening when the subject is store openings … and store closings. Watch stores like Macy’s and Kohl’s that have had fairly limited store opening programs the past few years. When the number of closings start to substantially outpace the number of openings, that’s a clear sign.

Watch Bed Bath & Beyond. It still adheres to an expansion policy in its namesake unit as well as its smaller divisions. If it were to start dialing back those numbers that will be another clear sign. There’s nothing to indicate that’s going to happen yet, but you never know.

Retail stores are not going away. Ever. But we are on the cusp of a fundamental change in the way consumers buy things.

It’s just a few more clicks away.