What I Hope Retailers Closing Stores Are Thinking About

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.