As the retail industry struggles to keep up with changing consumer demands and the shift to e-commerce, it’s not uncommon to find an increasing number of shuttered storefronts lining some of the country’s most dynamic shopping neighborhoods.
According to global research firm Coresight Research, retailers in the United States have announced 5,994 store closures in just the first 15 weeks of 2019 — already exceeding the 5,864 closures for all of 2018.
But not all store closings fit the “retail apocalypse” bill. While some have surely struggled with bankruptcy proceedings and liquidation sales, other retailers are reevaluating their business strategies by consolidating their physical footprints and upping their investments in digital platforms.
Walmart, for instance, has already shut down or plans to close its Supercenters in Dallas and Lafayette, La., along with another dozen or so stores from California to Washington. A new report by consumer analytics platform Placer.ai analyzed the big-box chain’s locations, finding that its decision to trim its brick-and-mortar count is less about a drop in foot traffic than it is about store cannibalization.
According to the firm, the Bentonville, Ark.-based company’s rapid expansion of bricks-and-mortar has ended up putting stores into direct competition with one another — including Walmart’s three Dallas Supercenters. (The company recently closed one of the units at 3155 W. Wheatland Road.)
“It was competing directly with two other centers with an almost complete overlap of customers,” said Zohar Bar-Yehuda, Placer.ai’s co-founder and chief data scientist. “This means [shoppers] weren’t choosing whether or not to go to Walmart, but which Walmart to go to.”
About 300 million people shop at Walmart stores every month, with the retailer reporting its best first-quarter comparable sales growth in nine years as well as earnings that handily topped expectations. For the three months ended April 30, Walmart — which currently has more than 4,700 locations in the U.S. — recorded same-store sales that climbed a solid 3.4%. E-commerce sales were an even brighter note for the retailer, improving 37% during the quarter.
“At a time of rapid expansion, retailers wanted to have as much of a footprint as possible, and cannibalization wasn’t a major concern,” said Beth Goldstein, accessories and footwear analyst at The NPD Group. “But that became an unsustainable model due to rising rents and other costs — and, in the case of the retailers, declining store traffic and convenient alternatives like e-commerce.”
Last March, Foot Locker made headlines. when it announced a plan to shut down more than 100 stores during the year. But experts quickly tamed the flames, insisting that the closings were reflective of the overall consumer shift to digital.
According to chairman and CEO Dick Johnson, the sportswear retailer was simply finessing its brick-and-mortar strategy. “Our store development and real estate team does a great job of working with landlords,” he said during the company’s Q4 2017 earnings conference call, a week before Foot Locker’s store closures made headlines. “The question is on where does the sale take place, where does the transaction take place? Because it’s going to take place wherever our consumer wants it to.”
Foot Locker has reduced its total store count every year since 2014, while continuing to be one of the industry’s success stories. This year, the chain plans to shutter 165 stores across the globe and open 80 locations. In its most recent earnings call in May, it also revealed two new “Power Stores,” a concept that serves as a “hub for local sneaker culture, art, music and sports.” (Foot Locker reported 3,201 company-owned stores at the end of the quarter.)
Shoe Carnival, on the other hand, has taken a more forward-thinking approach. Last year, the family footwear chain slowed down the number of store openings while closing underperforming outposts. In an October interview with FN, CFO Kerry Jackson explained the company’s goal: Wait for more favorable rents from landlords and for newer construction projects to hit the market.
At the FN CEO Summit, president and CEO Cliff Sifford added about Shoe Carnival’s strategy, “We have what we consider a world-class [custom relationship management] program. We want to find out exactly who our customer is, what motivates them, why else they come to Shoe Carnival and where else they shop.”
With more data-driven approaches, companies that have previously been unable to assess their location metrics can now leverage that knowledge, including whether to minimize their physical presence in order to maintain profitability.
“As data becomes more sophisticated, retailers have more tools to help them understand their customer base, and they can make more informed decisions,” Goldstein added. “Although in some cases, [they] might still choose to have some overlap if a location has strategic value like trying to edge out a competitor.”
Watch FN’s interview with these top shoe players.
Retail Store Closures: All the Companies That Are Downsizing in 2019