In recent years, retail store closures have dominated headlines. Coined the “retail apocalypse,” the shuttering of brick-and-mortar stores has induced panic as digitally native giants like Amazon swoop in for the win.
At Cardlytics, we see that the frenzy is justified. U.S. store closures exceeded 9,300 in 2019, compared with just over 5,800 for all of 2018. While the increase is staggering, for the brands that have kept their doors open, this “retail apocalypse” can also mean meaningful opportunity.
When a store closes, its former customers need to find a new place to shop. This means that a distressed brands’ competitors have the chance to steal those customers and the revenue they generate.
When One Door Closes …
Based on the $2.8 trillion in purchase data we see at Cardlytics each year, we know that when a physical store closes, half of its competitors in the vertical do not pick up their fair share of that distressed retailer’s sales.
When discount footwear chain Payless filed for bankruptcy in 2019 and shuttered all of its remaining physical locations, many footwear retailers didn’t capture their fair share of loyal Payless shoppers.
So, where did those shoe lovers go?
The Big Box Boom
Customers faced with store closures don’t just re-evaluate their spend with a distressed retailer. They rethink their spend in vertical-specific stores altogether. In fact, 20 percent of a distressed brand’s customers don’t come back to vertical-specific options when some stores close. Even worse, a shocking 45 percent don’t return to vertical-specific stores when all of a distressed retailer’s stores close.
Instead, many consumers turn to big box retailers like Walmart or Target, where all of their shopping needs are met in one location. With success driven by convenience, big box retailers are particularly successful during popular shopping seasons like back-to-school and the holidays, making it difficult for specialty stores to compete.
What’s a Retailer to Do?
In order to win future sales and keep a distressed brand’s customers, retailers whose stores focus on a specific vertical need to act quickly when a competitor closes its doors. Shoppers acquired in the first two to four months after a store closing are three to five times more likely to return. And those customers spend a full 30 percent more.
To pick up their fair share as competitors’ stores close, vertical-specific retailers should immediately execute acquisition campaigns to target distressed brands’ past customers. Offering consumers cashback deals is incredibly effective at driving foot traffic and making the most of a competitor’s exit from the market.
As the wrath of the retail apocalypse continues, it’s imperative that brands keep a close eye on the performance of their direct competitors. Through the imminent closings of brick-and-mortars comes great opportunity for savvy retailers to acquire customers and drive sales. The real retail tragedy would be allowing one door to close without opening another.
Dani Cushion is chief marketing officer of Cardlytics.