DEB’S RETAIL DISH AND DEALS: STORE OVERBOARD?

As is usual, right after the holiday season comes retail bankruptcy season and the inevitable closure of stores. The latest up is Tuesday Morning, which filed for Chapter 11 protection on Valentine’s Day and announced plans to close more than half of its 464 locations. Analysts are keeping an eye on others.

But what I found interesting at a recent visit to the apparel conference MAGIC is the idea that maybe retailers are over-reacting in cutting back on real estate.

Debra Hazel President

Debra Hazel Communications

North Las Vegas, NV

201-618-5247

When Walgreens had well-publicized issues with shoplifting in stores in San Francisco in 2021, it closed five stores in the city and more across the country, locked cabinets for some items and increased security.

“There was only one problem. The CEO admitted recently that maybe ‘We cried too much over shoplifting,’” said Dane Cohen, director of sales of Management One, in a speech.

By the time the stores closed, shoplifting stats were already dropping. Walgreens took a full point decrease going into 2022.

“All of these measures — the store closures, the locked cabinets, the increased security were too much,” Cohen said. “Not only was it a mistake, but it was also a mistake that cost them millions of dollars in expenses, millions of dollars from lost revenue and a ton of consumer confidence and brand trust when they closed stores in locations that relied on them.”

Back in 2018, ICSC published a report on what it called the “Halo Effect” on the interdependence of online and physical retail. The research found that the presence of a brick-and-mortar store increases online sales. Opening one new store in a market resulted in an average increase of 37% in overall traffic to a retailer’s website. And store closures are exceptionally damaging — web traffic share declined up to 77% for one retailer after closures. Brand awareness declines and it just becomes inconvenient to return items — and then buy other goods during the same trip.

Yes, yes, companies want to get out of pricey leases, and we’ve all seen an up-and-coming retailer sign way too many stores too quickly over and over again. Some locations are just bad. But real estate isn’t the only factor affecting their bottom line. Operations must play a role, too.

A personal example: A couple of years back, a coffeemaker didn’t survive a cross-country move. A replacement was ordered online from Bed Bath & Beyond, but the package didn’t arrive as promised. A quick call and the replacement came the next day. Then, the original package showed up.

A trip to my closest store to return the extra item was educational for me — and them. The very nice associates and assistant manager had no code in place to accept the extra coffeemaker and put it back in inventory. I’m still not sure how they figured it out.

Maybe what retailers need is not fewer stores, but better stores and systems?