Black out of the blue light: An analysis of Kmart store closing decisions

We investigate the spatial and economic factors that influenced Kmart's decision to close about 600 under-performing stores as part of its Chapter 11 financial objectives review in 2002 and 2003. We develop a theoretical model of retail store location and estimate an empirical counterpart using a Logit model to investigate the economic and spatial factors that influenced this decision, including the degree and proximity of competition in the local market as well as local demographic characteristics. In general, our empirical results offer statistical support for the accepted paradigm, but our model offers modest predictive ability as to which stores were actually closed. One interesting extension is a discussion of the potential implications of store closing on the local population, especially with respect to low-income households’ access to discount stores.