Data Suggests that Store Closures Can Have Positive Effect for Smart Businesses

Peter Roesler, President - Web Marketing Pros

By Peter Roesler

President, Web Marketing Pros

The internet has led to major shakeups in the world of retail. Brands that once dominated their industry are struggling to compete with online rivals. And even businesses that remain profitable have had to close locations and make adjustments to their retail strategy. While no business likes to close a location, there can be a bright side to it. Recent data from FourSquare suggests that store closings create opportunities for reaching Millennial shoppers and generating sales from old store locations.

Conventional wisdom suggests that when a retail store closes, the closure has an effect which is felt by all the businesses in close proximity. For example, most shopping centers have an “anchor store”, a large well-known business that attracts consumer traffic to the shopping center. When an anchor store closes, it could hurt the sales of nearby businesses, since fewer people will come to the shopping center once the store is gone.

FourSquare-Data-Store-ClosingsFoursquare recently released data based on the consumer traffic from Macy’s and Kmart locations that closed in 2016. The data from more than 180 store locations suggests that the conventional wisdom on store closures doesn’t show the entire picture. While there are certain some ill effects of store closures, there are several ways business owners can use these closures to their advantage.

“What we found: When a retailer announces store closures, one might assume that competitors see an immediate benefit,” the company explains in a statement about the report. “Yet that’s not what the data tells us. Instead, Millennials surge to closing sales. Loyal shoppers will stick with the retailers they love, traveling further to stores despite access to fewer locations. And competitive companies will have to wait several months before they see a boost in foot traffic to their stores.”

One takeaway from the report is that most of the people who visit a closing store location do so in order to take advantage of sales. Though unflattering, Foursquare described these shoppers as “Opportunists”. These shoppers made up 81% of the shoppers at closing Kmart locations and 86 percent of the Macy’s audience. Opportunists were shoppers who had not visited the closing locations for more than 6 months prior to closure announces, but who did visit during the close-out sales.

The data also suggested that businesses with closing locations can actually benefit from store closures. According to Foursquare, during Kmart’s closeout period, new shoppers showed up, defecting from competing retailers.

Analyzing the rise and fall of market share, the report authors note, “after the closures, the Kmarts that remained open surged back, with the stores’ market share increasing by 39% (the retailer retained 92% of their Typical Shoppers). This proves that Kmart was able to hold on to most of its existing customers and successfully divert them to other, nearby locations.”

To show just how loyal these shoppers are after the closeout sale, consider this: on average, these displaced but loyal consumers were willing to travel an additional 4.3 miles to visit the next closest open Kmart, almost doubling the distance they were traveling in the past.

Business owners with closing locations should use location-based ads to inform shoppers about nearby locations that can take the place of the store that’s closing. As the data shows, customers are loyal enough to drive a little further for a brand they like.

In the end, no business likes closing stores, but closing stores doesn’t have to mean the end of a business. Remember that store closings are often necessary as markets change. As long as business owners look at location closings as a way to keep a business on track, store closures can be the start of better times for retailers.

For more marketing data that can help business owners, read this article on the growing popularity of mobile payments for in-store and online retailers.

Share This Article