When a retailer closes stores, where do the shoppers go and how do shopping patterns shift? How much does a closed store impact the local economy, and a closed retailer impact national business?
This year, Macy's is closing 68 locations and Sears Holdings Corporation is closing 108 Kmarts — while The Limited, American Apparel and Wet Seal are closing ALL brick-and-mortar shops. With so much more upheaval in the retail industry expected to come, Foursquare dug into what happened around mass retail closures in the past to reveal what competitors and the industry can expect.
As a location intelligence company, we understand societal shifts and trends in foot traffic thanks to our first-party data. 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.
What we found: When a retailer announces store closures, one might assume that competitors see an immediate benefit. Yet that's not what the data tells us. Instead, Millennials surge to closing sales. Loyal shoppers will stick with the retailers they love, traveling further to stores despite access to fewer locations. And competitive companies will have to wait several months before they see a boost in foot traffic to their stores.
Lesson 1: Millennials hit up close-out deals
For this analysis, we looked at the foot traffic patterns from 2016 for Kmart and Macy's, and isolated shoppers into two distinct categories based on shopping behavior:
- Typical Shoppers: people who shopped at each retailer's closing location at least once within the 6 months prior to to the closure announcement. (19% of the total Kmart audience studied, and 14% of the total Macy's audience.)
- Opportunists: shoppers who had not visited the closing locations for more than 6 months prior to closure announces, but who did visit during the close-out sales. (This group makes up 81% of the total Kmart audience studied, and 86% of the total Macy's audience.)
Age breakdown of Kmart and Macy's shoppers
Based on our data, Typical Shoppers at Kmart skewed towards women over 35: they were 56% female, and over two thirds of them were over the age of 35. After the closure announcements in April 2016, a younger demographic popped at Kmart. The Opportunists were comprised of 10% more Millennials and 7% more men than the Typical Shopper group.
Customer demographics for Macy's close-out sales in 2016 tell a similar story: Typical Shoppers were 61% female and above 35 years old. After closure announcements, the gender gap leveled out, decreasing to a nearly equal ratio of 52% female. Once again, Opportunists were younger, with 8% more Millennials 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. 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 2: Retailers that close stores can lure new shoppers and retain loyalists
Next, we looked at market share of big-box and department store categories overall. (In all cases within this report, market share is defined as a portion of visits for a specific retailer versus all visits to top competitive national big-box or department store locations.)
During Kmart's closeout period, new shoppers showed up, defecting from competing retailers. We call these shoppers Opportunists, as defined above. Macy's lost 44% 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 of national competitors; it does not mean that the retailer lost 44% of its total foot traffic.) Kohl's lost 32% of its market share from the Opportunists, Target lost 14% and non-closing Kmarts also suffered, losing 12% of their market share.
Visit share of Kmart Opportunists at competitive national retailers
After the closures, the Kmarts that remained open surged back, with the stores' market share increasing by 39% (the retailer retained 92% of their Typical Shoppers). This proves that Kmart was able to hold on to most of its existing customers and successfully divert them to other, nearby locations.
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.
Our study on Macy's shows similar trends. During Macy's closeout sales, which occurred over a three-month period in the spring of 2016, Sears, Kohl's, Kmart and J.C. Penney lost market share from Macy's Opportunists who defected and took advantage of the door-buster deals at closing Macy's stores. Our foot traffic analysis revealed that Sears lost 73% of its market share as the Opportunists headed to Macy's, Kohl's lost 38% of its market share, Kmart lost 19% of its market share and J.C. Penney lost 15% of its market share.
After the closures, Macy's retained 71% of their Typical Shoppers, and remaining open Macy's locations in the U.S. saw a promising 36% boost in their market share for this group. This is likely bolstered by the fact that Macy's chose to close stores in larger markets like Los Angeles and Pittsburgh, where other Macy's are located nearby. As such, displaced loyal customers only traveled a mere two miles further, on average, to visit an alternate Macy's.
Retailers evaluating store closures should consider separate marketing campaigns devised to attract new shoppers to closeout sales and to retain previous shoppers by diverting them to alternate locations.
And as rumors continue to swirl about a possible takeover of Macy's by Hudson's Bay Co., Saks Fifth Avenue's parent company, a look at these post-closure metrics would give the holding company more detailed insight into the future growth potential of the remaining stores.
Lesson 3: Wins for competitive retailers take time, but they can be material
Lastly, our study allowed us to understand which competing retailers gained shoppers in the long run.
As we all know, small shifts mean big business for larger retailers, and two competitors were able to successfully lure away large groups of Kmart's Typical Shoppers. T.J. Maxx saw a 47% gain in its market share following the closures and Walmart had an 8% gain. These two brands walked away from the Kmart closures in the strongest position to further conquest Kmart shoppers.
Visit share of Kmart Typical Shoppers at competitive national retailers
In the Macy's post closures study, Marshalls' market share was up 29% relative to its starting point, Kohl's market share was up by 20% and J.C. Penney's market share was up by 10%.
What took us by surprise? Dillards also saw a noticeable shift, nearly doubling its market share among the Macy's Typical Shoppers in the nine months after stores shut their doors. During this time, the Little Rock, Arkansas-based retailer saw an 88% increase in its market share, stealing a comparatively small but meaningful segment of Macy's Typical Shoppers.
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. 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.
The Road Ahead
Here's what retailers can do mitigate losses and maximize visit share during the tumultuous year ahead.
For retailers considering store closures:
- Use Place Insights to understand foot traffic and determine the most strategic stores to close.
- Target sale messaging to customers most likely to respond to promotions, including millennials and men.
- Target the Typical Shoppers of closing stores and potential competitors with mobile ads promoting the next nearest location. Pinpoint by Foursquare targets consumers based on where they go in the real world, and can serve ads to over 150 million devices nationwide. (If this is a second round of closures, Foursquare can assess how far consumers are willing to travel, driving up ad efficiency.)
- Measure the impact of digital ad campaigns in driving in-store foot traffic with Attribution by Foursquare, determining campaign success based on whether ads effectively attracted bargain hunters and lured loyalists to new locations.
For competitors looking to win visit share:
- After a competitor announces closures, use Pinpoint by Foursquare to advertise sales or special promotions to your Typical Shoppers to retain your bargain-hunting base.
- Conquest your competitor's existing consumer base by advertising to people who visited the closing stores prior to the closure announcement, highlighting the proximity of your store locations.
- Use Place Insights for a deeper understanding of the competitive landscape. Learn where your loyalists shop and how far they travel to shop your stores.
Want to learn more about how Foursquare can help your business? Visit enterprise.foursquare.com or email firstname.lastname@example.org.
Foursquare analyzes foot traffic trails from more than 50 million monthly global users of its Foursquare City Guide and Foursquare Swarm apps and websites, which people use to explore the world and check in. These location-based apps help us understand trends and notable shifts. Our data is always anonymized and aggregated.
In this analysis, Foursquare's data scientists looked at visits — including both explicit check-ins (from Foursquare Swarm) and passive visits (from both apps) — to Kmart and Macy's locations that closed in 2016 in addition to competitor big box and retail stores. Typical Shoppers were defined as consumers who visited closed stores prior to the closure announcement and during the closure period, while Opportunists were defined as visitors who visited closed stores only after the closure announcement but before the actual closure (who had not previously visited these locations). Only chains with notable shifts in foot traffic patterns were included in the analysis and charts above.
For the distance travelled analysis, we calculated the distance between users' home locations and store locations, eliminating tourist visits.
All data is normalized against U.S. census data, ensuring that our cohort analysis accurately matches the U.S. population, and removes any age, gender or geographical bias.