Will this be the Christmas E-tailers Thrash Stores?

Come January the biggest post-holiday markdowns in the retail sector may be on Wall Street, not Main Street.

By then the analysts will know which of the nation's major store operators possess the shrewdness and nimbleness to compete with on-line sellers and which are dead ducks.

It will all come down to where millions of Americans do their Christmas shopping -- in cyberspace, or in the stores.

Such high-end specialty merchandisers as Nordstrom's, Sak's Fifth Avenue and Gump's aren't likely to be hurt by changes in the trend, at least not immediately. But suburban and downtown sellers of such commodity goods as toys, books, consumer electronics, computers and sporting goods may be in for a rough time.

Those are the predictions of Mark Borsuk, a San Francisco-based consultant who had to invent a word -- "MetaSpace" -- to describe what he does.

The term refers to the integration of cyberspace and retail space, and any mass-merchandiser who fails to master the requisite skills within the next year or so may not be around in a decade, says Borsuk, managing director of The Real Estate Transformation Group.

First, though, the stores must survive Christmas 1999. No one doubts they will get the lion's share of business during the last two months of the year. But even if sales growth is strong, it will look anemic compared to on-line merchandise receipts that are expected to more than triple last year's take of around $3.2 billion.

That will be a wake-up call for some retailers, says Borsuk, but others are going to snooze right through the alarm.

It's not that the laggards are oblivious or even dumb. But old habits die hard, he notes, especially when they've had thousands of years to take root.

Through the ages, merchants have succeeded best mainly by selling the right goods from the right location. But nowadays, if it is the kind of merchandise that is warehoused in a box and can be delivered promptly to your doorstep, who cares where it comes from, especially if the price is right?

The question may not matter much to most of us. But for those who operate megastores, the tidal swell of shoppers migrating to the Internet poses a mortal threat that must be met with all possible speed.

It will be difficult enough for them to merely anticipate the competition's next move, much less meet it squarely. For some stores the task will require subordinating or even discarding business tactics and principles that have worked perfectly well for years or even decades.

Some big egos are bound to get crushed. "The managers are dealing with a legacy [sales] channel, and everybody's pride and status are tied up in it," says Borsuk, a former currency trader who is a lawyer and leasing broker with an MBA from Sophia University in Tokyo.

Still more problematical is the question of what to do with all of the retail space that has grown around the so-called category-killers -- huge stores that concentrate mostly on a single item such as books, pet supplies, consumer electronics, records, toys, office supplies or other commodity merchandise.

In recent years these product lines have come to be dominated by what Borsuk calls "big-box" merchandisers, retailers who do most of their selling from giant, stand-alone buildings that often share a large parking lot with other big-box operators.

Together, a group of big boxes constitute a "power center," a term that is becoming more ironical as their very size begins to hobble them in competition with businesses that operate with few physical trappings in cyberspace.

Real Estate Investment Trusts, or REITS, who own big boxes and powercenters could take a bath once the analysts have figured out which have tenants who are most vulnerable to on-line competition, says Borsuk.

Meanwhile, with a $10 billion Christmas in prospect for e-tailers, Wall Street analysts will soon be breathing down the necks of retailing behemoths who are slow to change, predicts Borsuk.

Their message? "Step up your investment in cybersales, even if it means reducing outlays for new stores or the expansion of existing ones."

This is what Borsuk refers to as "reforming the sales channel matrix," and any big-box operator who fails to comply is going to see investment capital dry up faster than dewdrops on cactus.

As big box merchandisers begin paring their real estate costs in earnest, look for signs of growing strain between merchant and landlord, says Borsuk, who sees the coming years as a time of "negative symbiosis" between the two.

More immediately, he says, this will be the year Wall Street finally recognizes not only that the on-line buying channel is viable, but that its sales growth will come at the expense of retail stores.

"If there has been reluctance in the past to mark down retail stocks, investors won't be so reticent after Christmas 1999." Meanwhile, Borsuk says, retailers who make the transition from location-based sales to a first-class, multi-channel approach will be rewarded by Wall Street.

The urgency of changes yet to come has caused some merchandisers to become nervous, if not schizophrenic. According to Borsuk, Circuit City put out a news release last week implying that customers don't always get the best deals on-line.

The consumer electronics giant said it is a myth that on-line merchandisers always offer the best price, selection and convenience. Later that day, however, another press release from Circuit City promised free shipping to any customer who bought from the company's Web site.