Market Analysis
Part of Retail expansion and store networks
Understanding closures in the context of a wider network
Assess retail store closures through net network change, conversions, customer access and the economics of the remaining stores.
A store closure is a change in the network, not a complete assessment of the retailer. It may remove an unproductive site, accompany a conversion or leave a catchment with less access. To judge it, establish exactly what closed, what replaced it and what happened to customers, costs and nearby stores.
Reconcile the numbers first
Start with the opening count, additions, closures and closing count for the same banner, geography and period. Keep relocations, conversions, franchise transfers and reclassifications visible. A net fall of one does not prove there was only one closure: several stores may have opened and several others closed, or the movement may reflect a reclassification rather than a physical closure.
Network Changes: Target and Kmart Stores (Wesfarmers, 2020)
- Stores Converted (Target → Kmart)Multiple locations (exact number not disclosed in public announcement)
- Stores Closed (Not Suitable for Conversion)Several regional sites identified as unsuitable for conversion
- Net Change in Store CountNot specified in public release – requires reconciliation of additions, closures and reclassifications
Identify the decision behind a closure
Possible reasons include poor store contribution, a lease ending, an unsuitable building, a relocation or a format change. The reason affects what to measure next.
A conversion can preserve a location under a different banner; a relocation may improve access while leaving the old premises vacant. A permanent exit from a regional catchment can have a different effect on customers and staff.
Wesfarmers’ 2020 announcement described planned conversions of some Target stores to Kmart and closures of sites considered unsuitable for conversion, and acknowledged effects on employees, customers and regional communities. Those effects require separate evidence by location.
Impact of Store Closures vs. Conversions on Network Performance
- Store Closure (Permanent Exit)Loss of physical access, potential customer displacement, impact on regional communities and staff; no replacement site.
- Store Conversion (e.g., Target to Kmart)Preserves location under new banner; may improve format fit; retains customer access with brand shift.
Key Events in Wesfarmers’ Target and Kmart Network Adjustments (2020)
- June 2020Wesfarmers announced planned conversions of select Target stores to Kmart and closures of sites unsuitable for conversion.
- Post-June 2020Implementation of conversions and closures across regional catchments; focus on improving store formats and network efficiency.
Measure what remains in the network
Compare the period before and after the change at nearby stores and across the catchment. How much sales demand was retained, where did customers move, and did online delivery or collection replace any lost access?
Then account for the costs removed and any extra costs incurred elsewhere, such as longer delivery routes or more work at neighbouring branches. A higher sales figure at the nearest surviving store is not automatically a net gain if the network has lost customers or taken on new costs.
Separate temporary disruption from a sustained result. Closure dates may fall near seasonal peaks; a replacement site may take time to settle. Use comparable periods and show where the data cannot isolate the closure from pricing, local demand or competitor changes.
The closure may improve the retailer’s economics while reducing convenience for some customers, or it may accompany a better located replacement. Public counts establish the footprint change; the wider outcome needs evidence about access, retained demand and network contribution.
Assessing the Trade-offs of a Store Closure
- ProsReduction in operating costs; improved network economics; better alignment with customer demand patterns; potential for more efficient delivery routes.
- ConsReduced convenience for local customers; possible loss of sales demand; increased strain on nearby stores; negative impact on employees and regional communities.
