Digital disruption, shifts in consumer spending and a host of other challenges have sent many brick-and-mortar names packing during the past three years.
Although it seems logical that a slew of retail bankruptcies and store closings — Payless ShoeSource, Barneys New York and Sports Authority are some examples — should leave plenty of market share up for grabs, according to new data compiled by Cardlytics, a significant number of retailers aren’t picking up the slack.
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Cardlytics, which partners with financial institutions to run their banking rewards programs, found that half of competitors do not acquire their fair share of a distressed retailer’s sales after it goes out of business or simply shutters several stores. Cardlytics says it has visibility into two in five U.S. card swipes, allowing it to curate data.
And the reason is a combination of consumer shopping habits and some retailers’ inability to move in quickly enough to lure in shoppers who are left high and dry by a defunct seller.
Cardlytics’ analysis showed 20% of a distressed brand’s customers don’t return to a vertical — for example, sporting goods — when some of its stores close and 45% don’t come back when all of its stores close.
“Customers faced with store closures don’t just reevaluate their spend with the distressed retailer — they rethink their spend in the entire vertical,” Cardlytics noted. “If they don’t find an option, they turn away from the vertical altogether, generally in favor of big box retailers like Amazon and Target.”
For retailers looking to court new customers in the wake of a competitor’s demise, timing is crucial: Customers acquired in the first two to four months after a store closing are three to five times more likely to return and to spend 30% more, per Cardlytics. More specifically, said the researchers, the first three months following a rival’s store closing are critical for recapturing spend.
“So when a competitor shutters its doors, retailers must act quickly to win their fair market share through well-timed customer acquisition campaigns,” Cardlytics added.
U.S. retailers have announced more than 9,200 closures as of late November, according to Coresight Research, compared with just over 5,800 for all of 2018. While the continuing wave of closures could signal that retail remains in the throes of a so-called apocalypse, experts have lately suggested that many traditional players are finding their bearings by implementing stronger omnichannel strategies and right-sizing their brick-and-mortar fleets.
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