Three Ways Macy’s, Kmart And Other Store Closings Shape Shoppers’ Future Choices
Foursquare asks: When a large retailer closes stores in a vicinity, where do its shoppers go? Location data suggests that direct competitors aren't necessarily the winners.
A wave of big box retail closings have been rolling across small towns, suburbs, and large cities over the past year. But that doesn’t necessarily mean that the rival retailers who remain nearby the shuttered stores tend to immediately see a pick-up in customer visits.
In a look at the likely impact of store closings by Macy’s (68 shutterings planned this year), Sears Holding Company’s Kmart (108), and the complete liquidation of all retail locations by The Limited, American Apparel, and Wet Seal, Foursquare examined data of location patterns during previous “going out of business” activity.
How Millennials And Loyalists React
“Since both Macy’s and Kmart shuttered stores in 2016, we have a recent prior dataset to review for insights and key takeaways as nearly 180 more Macy’s and Kmart locations prepare to close their doors for good,” writes Foursquare’s Sarah Spagnolo in the location intelligence company’s study.
Here’s what Foursquare concluded among two primary groups of shoppers — “Millennials” and “Loyalists” —when a large-scale retailer disappears from the landsdcape: Millennials rush to the deals associated with closing sales, while Loyalists show willingness to stick with their favorite brand, even if it means traveling greater distances.
In the end, competitive companies will have to wait several months before they see a boost in foot traffic to their stores.
According to Foursquare, whose data is based on foot traffic patterns from more than 50 million monthly global users of its Foursquare City Guide and Foursquare Swarm apps and websites, “Typical Shoppers” at Kmart skewed towards women over 35: they were 56 percent female, and over two thirds of them were over the age of 35.
After the closure announcements in April 2016, a younger demographic’s visits surged at Kmart. Those classified as “Opportunists” were comprised of 10 percent more Millennials and 7 percent more men than the Typical Shopper group.
“While perhaps counterintuitive for some, the fact that Millennials and men come out to stores when they can save big is no surprise to us,” Spagnolo says. “We found this held true during the holiday shopping season, as we reported with our Black Friday analysis (Black Friday shoppers also tend to be Millennial). A word to the wise advertiser: Millennials might be pegged as online shoppers, but they shop in stores when they know about a good deal.”
Lesson Number Two: Targeting Opportunists
While closing stores is a painful concession retailers have always had to make, Foursquare notes that retail brands have a greater chance to get existing shoppers to transfer their loyalty — and their dollars — to a chain’s existing locations.
As Foursquare found:
- During Kmart’s closeout period, new shoppers (aka “Opportunists”) showed up, defecting from competing retailers.
- Macy’s lost 44 percent of its market share from Opportunists as compared to the six months before the closing announcement. (This decrease reflects the percent change in share for Macy’s from within this particular group; it does not mean that the retailer lost 44 percent of its total foot traffic.)
- Kohl’s lost 32 percent of its market share from the Opportunists, Target lost 14 percent and non-closing Kmarts also suffered, losing 12 percent of their market share.
“After the closures, the Kmarts that remained open surged back, with the stores’ market share increasing by 39 percent. This proves that Kmart was able to retain some of its existing customers and successfully divert them to other, nearby locations.” Spagnolo says.
“Our analysis found that 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,” she adds.
The Macy’s Effect
Foursquare’s study on Macy’s shows similar trends.
Macy’s closeout sales happened over a three-month period in the spring of 2016. Sears, Kohl’s, Kmart and J.C. Penney saw no pickup after the dust from Macy’s empty racks settled.
Those stores actually lost market share from Macy’s Opportunists who defected and took advantage of the “door-buster deals” at Macy’s shuttering stores.
“Our foot traffic analysis revealed that Sears lost 73 percent of its market share as the Opportunists headed to Macy’s, Kohl’s lost 38 percent of its market share, Kmart lost 19 percent of its market share and J.C. Penney lost 15 percent of its market share,” Spagnolo says.
After the closings, Macy’s was also able to keep its Loyalists. The chain’s nearby locations in the U.S. saw a promising 36 percent boost in their market share.
“As retailers consider store closures, they should consider separate marketing campaigns devised to attract new shoppers to closeout sales and to retain previous shoppers by diverting them to alternate locations,” Spagnolo says.
Which brings things to Foursquare’s third retail closing lesson: Taking market share from competitive retailers takes time, but the rewards can be substantial — and lasting over the long run
“What we learned is that while a competitor’s store closures might hurt in the short term, there is a sizeable opportunity to take advantage after closeout sales and closures are complete,” Spagnolo says. “This is a finding with a silver lining. As retail brands nationwide scrutinize how their stores perform, it’s important for them to be mindful of competitors’ close-out sales and the temporary effect on the whole ecosystem.”