Big Data Helps Predict Which Brick-and-Mortar Locations Will Thrive and Fail

The Gap’s recent decision to close its Fifth Avenue store in New York City hardly came as a surprise to anyone who has been following the retail giant this past year. With plans to close hundreds more underperforming stores around the country, the Gap is just the latest in a long line of brands to succumb to today’s retail challenges.

While the Gap says its decisions are being made based on traffic trends and profits—the brand saw a 7% decline in quarterly comparable sales—data scientists from top technology firms are working feverishly behind the scenes to use big data to predict which store closures could come next.

Having a heads up on which retail locations have a high likelihood of closing could benefit those in the commercial real estate sector, as well as retail brands looking to decide on future store locations.

At Dstillery, an applied data science company for advertisers, a team of data scientists is using the same behavioral insights that power programmatic advertising to predict where brick-and-mortar retail locations might close in the near future. As part of a yearlong analysis of struggling retailers, the company studied household incomes in the areas surrounding closed Gap stores, as well as the web browsing and location visitation patterns of people who live in those same areas. What they found was surprising.

Dstillery’s data science team discovered that web-based data was far better at predicting store closings than economic signals. Although there has been little word on which store locations the Gap plans to close next, Dstillery is predicting that the next round of closures will occur in the southeast U.S., central Connecticut, and Colorado. Consumers living in these areas display shopping habits and preferences similar to those living near Gap stores that have already closed.

Dstillery’s research also found that consumers living near Gap locations that have already closed have different preferences in taste and utility than those living near Gap stores that are still open. For example, consumers near closed Gap stores have an affinity for outdoor gear retailers, like Carhartt, L.L.Bean, and The North Face, and brands commonly found in malls, like Aeropostale, Journeys, and Zumiez.