In an article that appeared in National Real Estate Investor (NREI) Online on April 10, author Elaine Misonzhnik describes the recent store closure announcements from Walgreens and Pier 1 as part of a larger pattern of retailers “pursuing portfolio optimization and an omnichannel approach.” While I generally agree with that statement — and with the notion that increasing pressure from online sales growth is contributing to a more competitive brick-and-mortar environment — I was reminded once again of just how different the dynamics behind store closings can be. I think there’s a tendency to lump all store closings together, when the reality is much more nuanced and complex. Not all store closings are created equal, so for this week’s Retail Rap I wanted to break the recent announcements down into several different categories.
Take Walgreens and Pier 1, for example. These both fall into the portfolio optimization category of store closures. Even here, however, there are noteworthy differences. Walgreens has decided to close 200 stores, which may sound like a large number, but it’s only a drop in the bucket for a chain that operates more than 8,200 stores nationwide. As the NREI article mentions, Walgreens is also planning to open around 200 stores in the next year. To me this isn’t so much a series of closures as part of the healthy portfolio balancing process. Additionally, we haven’t seen many Walgreen’s stores close in a very long time — so in a sense Walgreens is “overdue”. Most likely, the stores that will close are burdened by a mediocre location, aren’t the right size, don’t have the prototype layout, or are lacking a drive thru pharmacy.
Another thing I wonder about (especially in light of the Sprint-RadioShack partnership, as discussed in this Retail Rap) is when two brands merge, until the official name change – do consumers know? Do they care? I think it will be fascinating to watch and see how this particular scenario plays out in the weeks and months ahead, how about you?