How many inexpensive candles, decorative pillows, bowls and small tables and chairs does it take to equal $332 million? Apparently, quite a few because that’s the amount of sales Pier 1 has cumulatively lost over the past five years, all of which came to a head on February 17 when it filed for bankruptcy and put itself up for sale. It raises the question of exactly where did those sales go and who’s likely to get additional revenue as the company struggles to stay in business? While several competing retailers have benefited from Pier 1’s troubles, one store in particular has been the biggest winner: Target.
New research from Placer.ai, the retail traffic tracking service, shows that Target has been positioned to gain Pier 1 shoppers in the past and, projecting out, would also be the biggest winner when Pier 1 shuts down half its stores this year and potentially goes out of business completely. The closings announced so far could throw another $750 million worth of business into play, with a like amount up for grabs should the retailer be liquidated completely.
If Target – and potentially other big competitors like Walmart, Wayfair and HomeGoods – get the majority of Pier 1 business, it points to the ever-increasing concentration of retail business in the hands of fewer and fewer powerhouses.
And if Target – and potentially other big competitors like Walmart, Wayfair and HomeGoods – get the majority of this business, it points to the ever-increasing concentration of retail business in the hands of fewer and fewer powerhouses. That’s something that will cut across all merchandising classifications, not just home.
Placer.ai looked at four key shopping states when analyzing the Pier 1 fall-off, focusing on overlapping shopping patterns to confirm where customers were most likely to go instead of Pier 1. In one state, the numbers are eye-opening. “When we look at Florida and analyze the period from June 2019 through December 2019, we see that 10.6 percent of Pier 1 visitors also visited a Target on the same day,” the report said. “It’s important to note that this is the percentage of Pier 1 visitors that also went to Target. Obviously, Target, like Walmart, benefits from having a much wider stock thereby increasing the likelihood of cross-shopping. However, considering both brands stock goods that one would find at Pier 1, the patterns point to a powerful opportunity.”
Other physical store winners according to this research include HomeGoods, Walmart and Cost Plus World Market. The numbers remain fairly constant for the other three states studied: California, New York and Pennsylvania.
The Biggest Boxes
And this research is consistent with projections from other observers studying the Pier 1 meltdown. Telsey Advisory Group, the well regarded financial firm, pointed to Target, HomeGoods and At Home in physical retailing and Wayfair in e-commerce as the big winners of Pier 1’s problems. Should Pier 1 shut down completely Telsey analyst Cristina Fernandez estimated that At Home, Wayfair and HomeGoods would see a 100 basis point sales lift, while Target would see a 20 basis point lift.
Whatever the eventual outcome for Pier 1, there will be significant shifts in market share in this specialized home décor and accessories sector, particularly as the biggest player in the space, Bed Bath & Beyond, continues to have its own problems, bleeding sales for multiple years. It’s why the Biggest Boxes – as opposed to just big boxes – will ultimately be the true winners in this latest retail shakeout. As Walmart and Target continue to improve their own efforts their market shares will grow. The Pier 1 ship may have already sailed but there will still be rough seas ahead for many retailers trying to compete against the true giants of the business.