Grapevine

The unintended consequences of brick-and-mortar's decline

Lately, many big retail brands have been closing physical locations, in what has become known as the "retail apocalypse." Whether the stated reason is declining revenue, or concerns related to "shrinkage" and employee safety in some cities, the impact of store closure on consumers and their communities threatens to be seriously negative.

The financial spillover for the retailers themselves, though, may be an equally valid concern. Yet few observers ask questions such as, What happens to shoppers when stores close? What about sales? Are firms better off with their decisions to close shop?

Taotao Ye, assistant professor of marketing at the Donald G. Costello College of Business at George Mason University, addresses this glaring gap in the research literature in a research paper forthcoming in Marketing Science (co-authored by Venkatesh Shankar of Southern Methodist University).

The researchers obtained comprehensive online and offline transaction data for a major video game and electronics retailer, spanning July 2015-July 2017. "We have detailed records of every transaction" in addition to the locations of these transactions, Ye says.

Over the two-year period, the retailer closed more than two hundred stores, a figure representing more than 5% of its brick-and-mortar presence. The researchers analyzed the effects of each store closure at the per-county and per-customer levels.