To Close or not to Close? Assessing the Impact of Outlet Closures on Retail Chains

Abstract

Abstract Retail chains often face tough competition and permanently seek to increase profitability. Closing outlets is a common strategy, even if knowledge about its implications is limited. Indeed, chain sales losses from store closure of a multi-outlet retailer operating multiple formats vary widely across outlets (ranging from less than 30 % to more than 80 % of the closed outlet’s revenue) and depend not only on the closed store’s format and distance to competitors, but also on the profile of its clientele and type of shopping trip. Analyzing these criteria helps to predict the magnitude of these losses for specific store closures using a new model. It offers guidance to retailers in deciding whether a particular store closure is beneficial to the chain or, if the objective is to prune an overly dense network, which of a set of local outlets is the best candidate for closure