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Retailers learn how to save market share when closing stores

 

Retailers are figuring out how to close stores more efficiently. On its year-end earnings call with investors, Kohl’s CEO Kevin Mansell said the company is slowing down its store closing process after losing more market share than expected in shuttering 18 underperforming units in 2016.

 

Mansell said only one third of the sales lost at closed stores has migrated to other Kohl’s stores. And 10 percent of online market share was lost in those areas where stores closed, Mansell said.

 

Macy’s meanwhile is learning to put on the brakes as it closes 100 stores across the U.S. this year. “We're getting better and better at this because, as we've closed more stores, we've learned a lot about how to retain sales in other stores,” the retailer’s outgoing CEO Terry Lundgren said on a conference call. “Last year we did significantly better than we had done in the past and we hope that, with the closures this year, to do even better than that.”

 

When Macy’s closes a store in a single-store market, that market’s Macys.com sales suffer, he said, so Macy’s targets that store's customers with emails to try to lure them online. Even so, he said many customers don’t want to buy anything online they can’t return to a nearby store, contributing to market share loss.

 

“In a multi-store market, the answer will depend on how dense the stores are in that market, how far away the nearest store is, and also how similar the trading areas are,” Lundgren said. “So, where the demographics are similar, trading areas are similar, we could retain roughly 40% to 45% of the sales. But in other cases it's only 10%. So, it really does depend on the individual situation.”

 

Lundgren said Macy’s is announcing store closures further in advance of actual closings because it helps save market share by giving buyers more time to incorporate size and purchasing trends from closing stores into nearby stores. “By announcing it and talking about it earlier, we've been able to do a better job of getting the assortment right for the new store, so that we could retain more of the sales.”

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