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Assessing the Reasons behind Store Closings

Assessing the reasons behind store closings can highlight important industry trends and market changes. In the selected article, Stebbins and Sauter (2018) show that all of the retailers chose to close their stores to reduce expenses. Another similarity between the businesses is that the products they sell can be purchased online, which could have contributed to their decision-making. Online shopping has become particularly popular in the United States over the past decades, and the majority of customers make at least some of their purchases online (Smith and Anderson, 2016). Selling online is cheaper for retailers because it allows saving on rent and staff costs. Consequently, retailers that have online stores or can sell through third-party online platforms typically benefit from reducing the number of brick-and-mortar stores. On the one hand, they can prevent future losses if brick-and-mortar sales decline further, thus sustaining their financial position. On the other hand, they can use the money saved by closing stores to expand and improve online operations. This would help them to attract more online customers and benefit from the increasing scope of e-commerce.

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Two retailers that are likely to close in the next three years are The Children’s Place and Kmart. Both companies closed a significant percentage of their offline stores, which indicates that they are struggling with managing their losses. At the same time, clothing for adults and children can be bought online quickly and easily, and many people are already enjoying the benefits of online clothing shops. Hence, the companies’ reluctance to use the opportunity and expand their e-commerce business will likely cost them their market share, causing them to exit the market. The brands presented in these stores could stay and sell through online platforms or stores.

References

Smith, A., & Anderson, R. (2016). Online shopping and e-commerce.

Stebbins, S., & Sauter, M. B. (2018). Subway, Rite Aid, Toys R Us, Teavana: Retailers closing the most stores in 2018, so far. 

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