Being a clothing retailer is hard these days.
Due to the popularity of Amazon.com, H&M, and other “trendier” companies, the Macy’s and Kmarts of the world are seeing less foot traffic, decreased sales, and changing consumer interests. This is forcing these companies to close hundreds of stores and focus on their best performing ones.
At least they’re not American Apparel, Wet Seal, and The Limited. These well-known clothing store chains, among several others, are shuttering all of their locations, laying off their staff, and selling off their remaining assets and stock to the highest bidder. If these stores focused more on online sales and competed (or cooperated) with Amazon and the like, they could’ve faced a different fate.
While these stores didn’t have as many customers as they needed to stay open, they still had thousands of customers. Which begs the question: where do these customers go after their favorite stores close? Thanks to location-sharing platform Foursquare, we now have some semblance of an answer.
Foursquare analyzed their user data to see what happened when major retail store locations started closing down.
They found that shoppers who never visited these locations or hadn’t been to these locations in over six months took advantage of the going-out-of-business sales. In fact, 81% of visitors to a Kmart store in the company’s study were either new or hadn’t been to the store before.
Foursquare also learned that millennials made up a sizable percentage of people visiting these stores.
While shoppers visiting the studied Kmart and Macy’s stores were mostly 35+ men, a sizable percentage of millennials took full advantage of the rock-bottom savings and bargain bin prices that the clothing stores offered. A small percentage of these millennials had visited these stores prior to their closing.
Lastly, Foursquare learned that competing stores didn’t see an immediate benefit. In fact, they lost customers.
Stores like Kohl’s and Kmart locations that weren’t closing lost a certain percentage of their customer base as those shoppers flocked to closing competitors. While those stores eventually saw an increase in customers after the stores closed, their sales were negatively impacted by the stores going out of business.
With this in mind, should you invest in the retail sector? The retail climate is pretty tough right now, especially as Amazon and popular fashion brands (H&M, Uniqlo, etc.) continue to expand offerings online. Sears’ stock is also doing pretty poorly, even as they close numerous locations. If you still wanted to invest in the retail sector, you could do you research and invest in popular retail ETFs. If you think retailers will continue to spiral downward, however, you might want to invest elsewhere.
You can find the full Foursquare report here.