It seems weekly, if not daily, we hear of yet another retailer closing some or all of its stores. The Fung Business Intelligence Centre created a tracker, last updated earlier this month, to follow all the news.
In making store closure decisions, retailers are, of course, looking at real estate terms and four-wall profitability and the prospect that customers of a closed location may decide to shop in another location nearby.
I hope these additional considerations are also part of the conversation and planning, if not the decision-making process itself:
- Is the store performing poorly because you "planned it out of business"? I'm using a classic industry phrase for giving a store so little inventory or assortment it's not worth a customer's time, but the concern also applies if there's not a salesperson to be found or an elevator has been broken for years.
- Store signage is a billboard that increases consumer awareness and reminds current customers that a brand exists. If the store won't be there, how are you marketing in this geographic area?
- Relatedly, the presence of stores lowers online customer acquisition costs. Have you budgeted for higher ones?
- Relatedly again, customers who shop in stores tend to be of higher value. Without stores, have you brought down your CLV expectations?
- Customers are less likely to buy from a store if there's not a location nearby for them to make returns. Have you reduced online sales expectations?
- And if they do buy and need to return, it's your shipping dollars paying for it (whereas customers might have brought 80%+ of returns back to a store if convenient).
- Store visits - including showrooming - may play a critical role in customers' purchase journeys. Do you know what you'll be missing?
- Stores are a strategic way to develop a customer connection that's not just a transactional online sale. If your brand is important and stores have been a part of it, what's your new approach?
- Are your nearby competitors closing their stores? Customers may not stick with the same chain if it means transferring to online or another location if they can keep walking/driving to the same place and buy something similar from another company.
- If you ship from stores and it's economical or allows you to get goods to customers in certain areas faster, you'll give that up.
- Some items sell better in stores vs. online (and vice versa); if, for you, it's the higher-margin product that sells better in stores, prepare for margin rate deterioration beyond just the missed sales.
Please comment below or e-mail me with what you hear retailers talking about on this topic, and what you think is being missed. Also, I haven't linked to all the findings above, but I can provide background for anyone who wants it.
Thumbnail image is from the Fung Global Retail Tech tracker mentioned above.