Explaining physical retail store closures in digital times

Abstract

The widespread closures of physical retail stores in the digital age significantly impact business outcomes, urban communities, and regional economies. Understanding this phenomenon is crucial for retailers, policymakers, and society at large. Drawing from literature on retail success factors, we derive a comprehensive set of factors that may help explain why some retail stores close while others survive. We test the relationships of these factors with store closures using a unique dataset that combines responses from a large-scale consumer survey with observational data on actual store closures in the apparel and media categories between 2015 and 2020. Rare-case regression analyses reveal that factors related to the store's product selection (e.g., assortment uniqueness), store environment (e.g., an accessible location), the offered experience (e.g., store atmosphere), and frictionless transactions (e.g., via convenient store hours) are significantly associated with store closures in our data. In contrast, several other established store success factors (e.g., service) show no such significant association. Additional empirical analyses highlight differences between stores that offer apparel versus media products, are smaller versus larger, and located inside versus outside city centers to provide context and specificity to the findings.