Do Big Chain Closures Help Small Stores?

The year is well past the halfway mark, and we’ve already seen retail chains taking a hit all over the place. Specifically, big retail store closures continue at a higher than the global financial crisis. We know why. In the first place, spending growth is online, not in stores. Secondly, big retail already operated too many branches anyway. So, while big retail adjusts to reality, will chain closures benefit small stores at all?

Anecdotally speaking, yes. According to an article from the Associated Press, one retailer reported a bump in sales thanks to one big store closure. Aric Shlifka, the owner of Kiddles Sports in Lake Forest said the bankruptcy of Sports Authority in 2016 contributed to a 5% increase to his business.

“I feel mass/chain store closings scare people, and make them realize how many jobs and tax dollars are lost and want to support the local retailers more,” Shlifka says.

Indeed, research suggests a growing interest in shopping locally to support the local economy. According to PWC’s Total Retail Report for 2016, 29% of customers that shop locally say they do so to support the local economy. This ranks high among other motives, such as better after sales service (31%), helpful staff (29%), and personalized service (28%).

Closures a Mixed-Bag for Small Stores

Location, however, determines how big retail closures impact small stores in the US. Specifically, in shopping malls where anchor stores draw foot traffic, a big chain closure can wipe out smaller retailers.

For example, when JC Penney closed in an upstate-New York mall, the local economy went into a tailspin. First, according to Marketplace, smaller apparel stores went away. Then the mom-and-pops disappeared. The mall’s owner, consequently, went into default, creating a serious drag on the town’s economy in lost jobs and taxes.

Meanwhile, small retailers in a nearby town appeared to take up the slack. As Marketplace writes, Kingston’s main drag buzzes with people “ducking into shops and eating at cafes” on any given afternoon.

The Small Store Retail Advantage

If you think about it, this “retail apocalypse” comes down to a question of real estate.

Big retailers have too much of it. Their historic success relied on moving large volumes of inventory to cover the costs of staffing, inventory, warehousing, and of course, floor space.

And with eCommerce growing at a faster rate than overall retail, big retailers can’t rely on the foot traffic to support that infrastructure. Which is, of course, why the big retailers that continue to operate rely more on eCommerce to stay competitive.

Small stores enjoy an advantage in this and other areas:

• Smaller retail carries lower operating expenses than big retail.
• Local stores appeal to customers’ desire to support the local economy.
• Shoppers still prefer personal customer support.
• Small stores can start eCommerce channels at little, added expense.
• As big retail closures continue, small stores can fill the gap.

Additionally, small stores can capitalize on these advantages by optimizing stock to keep costs down both in the store and online.