According to location intelligence firm Foursquare, competitors of retailers that close stores don’t immediately see a benefit in their grab for market share but can see material gains once those closures are completed.
Sarah Spagnolo, Foursquare’s editor at large, said consumer behavior following Macy’s closure last year of 68 locations and Sears’ shuttering of 108 Kmart stores can be used to extrapolate consumer reaction — and their shopping patterns at brick-and-mortar stores — once store closures at chains such as Macy’s, American Apparel and Wet Seal are completed.
She had Foursquare’s data analysts and scientists evaluate 1.3 million consumers to see where they went to shop, using location awareness apps that the company has in place to measure activity by consumers who have opted-in to background location sharing. Tracking location-based technology, such as beacons, are also used. She said the data results — made anonymous and then aggregated — were then “normalized to match U.S. Census data” to eliminate age, gender and geographic bias.
In general, Foursquare captures “foot traffic trails” from more than 50 million monthly global users of its Foursquare City Guide and Foursquare Swarm apps and web sites. The location-based apps, which people use to explore the world and check in, help Foursquare understand how foot traffic changes over time as trends and societal shifts occur. Last year, the data team accurately predicted initial sales of iPhone 6 and iPhone 6 Plus, as well as revenues from Black Friday sales.
As for the 1.3 million in the foot-traffic panel, the data indicated that more than two-thirds were ages 35 and older, with 56 percent female. Following the store closure announcements, a younger demographic popped at Kmart — described as opportunistic shoppers who are overwhelmingly Millennials, although male consumers also gravitated toward the store closure sales. At Macy’s, the typical shopper, at 61 percent, is female and over the age of 35. But after the store closure announcement, the male-to-female shopper ratio was nearly equal, with women ahead by a narrow margin at 52 percent, and Millennials again were part of the opportunistic shopper group.
Spagnolo said that when a retailer reveals store closures, Millennials surge to those locations to take advantage of sales. In contrast, loyal shoppers will stick to the retailers they love, “even traveling further to stores despite fewer locations,” she said. It might not be until several months later, depending on when the store closing sales are completed, that competitors will get to see a boost in foot traffic to their retail locations, the data showed.
The location intelligence firm also looked at market share of big-box and department store categories to extrapolate how retailers that close stores can lure shoppers and retain loyalists.
The data showed that during Kmart’s closeout period, opportunists defected from competing retailers — Macy’s lost 44 percent of its market share during this time; Kohl’s was down 32 percent; Target lost 14 percent, and non-closing Kmarts saw a 12 percent decline — but the Kmart’s that remained open later surged back up and saw market share rise by 39 percent. Spagnolo said that indicates that Kmart was able to retain some of its existing customers by diverting them to other, nearby store locations. The Foursquare analysis also showed that consumers loyal to a particular retail brand were willing to travel an additional 4.3 miles to visit the next closest open Kmart.
The foot-traffic data Foursquare tracked for Macy’s showed a similar pattern, according to Spagnolo. Over a three-month period in spring 2016, Sears, Kmart and J.C. Penney lost market share as opportunists flocked to Macy’s to take advantage of its closeout sales. Sears’ market share was down 73 percent; Kohl’s saw a 38 percent decline; Kmart fell 19 percent, and J.C. Penney had a 15 percent decrease. Following the closeout period, the remaining open Macy’s stores saw a 36 percent boost in their market share. That rate of increase was likely boosted by the closures having been in larger markets where an alternate Macy’s was likely close by. Foursquare noted that most displaced customers traveled just two miles further to the closest, open Macy’s location.
Spagnolo concluded that retailers that are closing some sites “should consider separate marketing campaigns,” one to attract new shoppers to the closeout sales and the other to retain displaced customers by diverting them to the nearby, alternative store locations.
The data also showed that while a competitor’s store closure might hurt market share in the short term, there is opportunity for market share gain once the closures are complete. In the case of Kmart’s closures, Foursquare found that T.J. Maxx saw a 47 percent gain in its market share and Wal-Mart had an 8 percent gain. And post Macy’s closures, the Foursquare study saw Marshalls’ market share rise 29 percent, with Kohl’s up 20 percent and J.C. Penney at an increase of 10 percent. One surprise was Dillards, which the data indicated had an 88 percent gain in its market share.