April 30, 2017

What Happens To Online Sales When A Store Closes?

The popular argument out there is that when the customer is brand-loyal, you can close a store and the customer will simply "shop online".

Those who analyze historical store closures learn something different. They learn that "some" sales move online. Some.

Here's an example. I have eight simple segments that I analyze, based on purchase activity over the past year. Click on the image to look at the table. Go ahead! I'll wait right here ...

This is where things get really interesting.

If you manage a "brand" that has a strong online presence, you can make up retail sales (to some extent) via your online channel.

Look at the annual rebuy rates of retail-only segments ... down about 35% year-over-year. With a strong online presence, the "brand" can maintain some of the sales because customers will shift online.

Now if your online penetration is less than 25% of total sales in a trade area, well, you've got yourself a veritable plethora of challenges.

In the table above, online-only buyers are barely impacted by the store closure. Only the retail-only customers get hammered.

Later this week, we'll put this information into the context of a five-year sales forecast with/without a store in the trade area. But for now, we can see that closing the store results in a decrease in customer loyalty, especially among former retail buyers ... just as we'd expect to happen.

"Forecasting outcomes are the sum of all analytics and marketing knowledge possessed by your company."

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