Retailers are off to a bumpy start this year, with some of the nation’s largest brick-and-mortar chains announcing plans to shut down certain locations or close up shop altogether. With so much upheaval in the retail industry, Foursquare decided to use its first-party foot traffic data to offer a glimpse into the future for those brick-and-mortar stores left standing in towns across America.
Using both explicit and passive location data from its Foursquare City Guide and Foursquare Swarm apps and websites, the company analyzed consumer visits at Macy’s and Kmart locations that closed in 2016. Foursquare also looked at foot traffic at competing retail stores around the same time period. What the company found is instructive for brick-and-mortar retailers looking to capitalize during the aftermath of big box store closings around the country.
“With our location intelligence, which looks across the entire competitive set, we can see the interdependency of all of these retailers—how shifts for one can impact the entire group,” said Sarah Spagnolo, editor-at-large at Foursquare.
By looking at foot traffic patterns, Foursquare was able to isolate shoppers into two categories. “Typical shoppers” were considered people who shopped at each retailer’s closing location at least once in the six months prior to closure, while “opportunists” were shoppers who only visited during close-out sales. Shoppers in the “opportunist” category at both Kmart and Macy’s tended to be younger than those in the “typical shoppers” group.
“We saw that once again, millennials, who have a reputation for avoiding in-store shopping, are drawn to brick-and-mortar for big promotions and deals,” Spagnolo says. “Our Black Friday foot traffic data showed that millennials were likely to haul out to stores for Black Friday savings, and this recent analysis of department stores reinforced that notion.”
Foursquare saw a 10% rise in millennial shoppers visiting closing locations during the close-out sales period, compared with a store’s typical demographic makeup. The company also found that a large number of shoppers changed their shopping habits following closures, but not in the way that most retailers would probably expect.
“We saw this during both Macy’s and Kmart close-out sales: large numbers of new customers headed to closing locations and stayed away from the other retailers that they typically frequented. We also saw this play out in the long run as consumers changed their shopping habits following closures, either traveling further to visit the same retailer’s next nearest location, or by heading to different retailer’s stores entirely,” she says.
Customers who were loyal to Kmart were willing to travel an additional 4.3 miles to visit the retailer’s next closest locations after their local stores closed, which is almost double the distance they were willing to travel in the past.
When Macy’s announced its store closures and closeout sales last spring, the retailer actually drew shoppers away from competitors like Sears and Kohl’s. According to Foursquare’s data, Sears lost 73% of its market share during this period, as shoppers in the “opportunist” category took advantage of deep discounts at closing Macy’s locations. Macy’s managed to hold onto its loyal shoppers even after those sales were through, with displaced customers traveling two miles further, on average, to visit Macy’s locations that were still open.
These results may seem counterintuitive to retailers assuming they’ll benefit when close rivals shut down, but in fact Fourquare’s data shows that boosts in sales for competing retailers can take time. Although a competing store’s closing might hurt in the short term, there is still opportunity for brick-and-mortar retailers to take advantage of the shift in consumer loyalties after closeout sales are complete.
“Local retailers should be prepared for a possible dip in foot traffic as shoppers head to close-out sales, but should also recognize that there will be a slew of new shoppers heading out looking for deals,” Spagnolo says. “They should offer competing deals and target ads to these millennial shoppers promoting their store as a nearby alternative.”
Stephanie Miles is a senior editor at Street Fight.