Welcome to the unique weekend article for the Loyal Fan subscribers-only edition.
This is the #66 article of The Operational Excellence Tools Series.
Outlines and Key Takeaways
Part 1 – Official Announcement
Part 2 – Background and Meaning
Part 3 – Analysis Through the Lens of Operational Excellence
Part 4 – Lessons for Businesses
Part 5 – Conclusion
PART 1: OFFICIAL INFORMATION
On a street in the American suburbs, a store that had stood there for years suddenly went dark. A “for lease” sign appeared on the glass. Passersby so used to it that they no longer noticed it only now realized it was gone. The scene, in itself, is nothing unusual. What is unusual is that in the middle week of August, that scene repeated about 417 times across the United States, according to a firm that specializes in counting store openings and closings. Not over a year. In seven days. And the previous weeks were the same, each with a few hundred. Add up the whole year and the number of store closures in the US reaches the thousands, enough to be called a wave rather than a few unlucky cases.
When hundreds of stores go dark this steadily, it is very easy to conclude that retail is dying. But hold on. The number 417 lumps together two very different things, and separating them is the first step to understanding correctly. Some stores close because their owners have run out of money: bankruptcy, mounting debt, no other way out. These are usually old chains, outdated models, carrying too much large floor space from an era when everyone had to come in person to buy anything. And some stores close for the exact opposite reason: their owners are healthy, doing well, and proactively cutting away their weakest points to concentrate strength on the rest. On the statistics sheet, these two kinds sit in the same row, both recorded as one store closed. But in reality, one kind is the sign of a loser, and the other is the move of someone growing stronger. Reading the two as one is to misunderstand from the start, and from that misunderstanding come wrong conclusions about the whole industry.
Why it all piles up now is not hard to guess. Americans buy online more and more, so many physical stores no longer have enough customers to support themselves. At the same time, rent and staff wages are both rising. A store that both loses customers to the phone screen and has to pay more to keep its doors open will, at some point, cross the threshold where keeping it open costs more than closing it. Most of those 417 stores crossed exactly that threshold, and for them the decision to close was not a hard choice but a simple subtraction: less money coming in than going out, month after month, with no sign of reversing.
But looking only at the closing column shows half the picture. Right now, also in the US, many big chains are still opening stores, just a different kind than before. Smaller. Closer to where people live. And doing different work. Quite a few open not to sell in the old way, but to let customers pick up what they ordered online, receive returned goods, and act as a springboard for fast delivery to the surrounding area. One company can close a giant store out on the highway and open three small points in a residential neighborhood, in the same quarter. That is not fleeing. It is changing how it appears before customers, from a few big points placed where rent is cheap to many small points placed closer to customers, where they can both sell and serve as delivery-and-pickup spots.
So reading the number 417 as a string of scattered closure decisions is a misreading. It is the sign of something much larger: the chains are redrawing their store map. Each store does not live alone. It is a point in a network covering a region, and its fate is tied tightly to the points around it. Close one point, and its customers do not evaporate but flow to the other points, making delivery routes longer. And there is something few anticipate: when a store closes, online sales in that very region can drop too, because a store standing on the street quietly pulls along the online sales around it. The map, therefore, must be read as a whole, not as a list of independent rows.
The American story deserves the rest of the world’s attention simply because the US got here first. Britain, Europe, and the large cities of Asia are all under the same three pressures: customers shifting to the digital channel, rising rent and labor costs, and stores forced to double as logistics hubs. And not just retail. Banks with many branches, restaurant chains, gas-and-service-station chains, all will eventually stand before this same problem. The US is only showing the rest a preview of what is coming, and whoever watches that preview closely will avoid the mistakes the ones who went first paid for.
And here is the most dangerous part. The big risk lies not in closing stores, but in closing without knowing what you just cut away. A store that loses money on paper but is the main place for a whole region’s customers to pick up online orders, if closed, can collapse the region’s online sales, and that loss is several times larger than the supposed saving. The reverse is also true: clinging forever to a store that has lost its role, merely out of reluctance to decide, is money quietly draining away every day. Telling right closures from wrong ones takes not courage, but tools. The three tools in Part 3 are for doing exactly that.