As the ‘retail apocalypse’ continues, many big-name brands are closing physical stores, with profound implications. This article examines the unintended consequences of these store closures, including significant sales losses for retailers and the disruption to loyal customers. It highlights the importance of seamless omnichannel experiences and strategic downsizing to mitigate the impact. Explore the insights from this study to understand the complex dynamics shaping the future of retail. Retail apocalypse, Omnichannel retailing
The Surprising Impact of Store Closures
Contrary to popular belief, the closure of brick-and-mortar stores can have a devastating impact on a retailer’s bottom line. Recent research by Taotao Ye, an assistant professor at George Mason University, reveals that the net losses experienced by a major video game and electronics retailer far exceeded the average sales of the shuttered locations.
The study, which analyzed comprehensive online and offline transaction data over a two-year period, found that each store closure resulted in an average net monthly sales loss of $209,317 – a staggering 18% of the average monthly per-county sales total. This suggests that retailers are failing to effectively redirect customer activity to their remaining locations or digital platforms, leading to substantial additional losses.
Decoding the Customer Loyalty Paradox
The researchers speculate that the negative impact of store closures goes beyond mere inconvenience for customers. Their data reveals that even customers with a preferred location close to home started frequenting that location less often and making fewer purchases after the closure of another, farther-away store from the same retail chain.
This suggests that the shuttering of a store may send a negative signal to consumers, prompting them to transfer their loyalties to competitors that appear to be more stable. It’s a form of ‘stability-seeking’ behavior, where customers crave a sense of reliability from the brands they support. Unfortunately, retailers have generally been unsuccessful in redirecting these ‘orphaned’ consumers towards their e-commerce options, as the onboarding process can be complex and challenging for customers.
Strategies for Navigating the Retail Transformation
To mitigate the losses associated with store closures, Ye offers several practical recommendations for retailers:
1. Focus on creating a seamless omnichannel experience: Simplify the onboarding process and make it easier for customers to engage with the brand across both physical and digital channels. This can help decouple brand loyalty from the presence of any one location.
2. Consider alternative approaches to downsizing: Instead of wholesale store closures, explore options like small-format stores or strategic scaling down based on localized customer data. This can help retailers maintain a physical presence while optimizing their brick-and-mortar footprint.
3. Analyze the total impact before making closure decisions: Retailers should thoroughly evaluate factors such as distance to other store locations, in-store discounts, and product return rates to determine the full consequences of shuttering a specific store.
