Retail store churn and performance – The moderating role of sales amplitude and unpredictability

One of the key decision making processes for retailer performance is optimizing store locations which involves both the opening and closing of stores, or store churn. With the recent challenges in the retail industry illustrated by failing retailers and massive store closures, the discussion of the value or detriment of store churn is at the forefront, yet limited studies shed light on this important aspect of retail performance. Drawing on Dynamic Decision Making framework, using a longitudinal sample we investigate whether store churn generates negative or positive returns and if two environmental factors relevant to the retail industry—amplitude and unpredictability of seasonally adjusted industry quarterly sales—influence the relationship between store churn and performance. In a sample of 115 publicly traded retail chains in the US between the first quarter of 1986 to the first quarter of 2017, we found that store churn has a positive but small overall effect on performance and that under conditions of lower levels of amplitude or low unpredictability of industry sales, the small direct effect of store churn becomes a much greater positive effect. The findings show that, amongst a mature population of retailers, store churn in the face of lower amplitude and unpredictability may lead to higher returns.