UNIVERSITY OF COLOGNE

Retailers are grappling with an unprecedented surge in the closure of brick-and-mortar stores, exemplified by over 2800 store closures in the United States in 2023. This study aims to explore the repercussions of these closures on retail prices. Does the departure of these physical stores exert upward pressure on prices, potentially imposing higher costs on consumers? Through an examination of store closures within a major retail chain, we employed a synthetic difference-in-differences estimator to evaluate the impact of store closure on retail prices. Our findings reveal that, on average, consumers experience elevated prices for both national-brand (NB) and private-label (PL) products post store closures although considerable heterogeneity can be observed across markets. Further analysis indicates that the price increase for NB products is primarily driven by store closures in low-income communities, while prices for NB products decrease in middle-class and upper-class communities. As for PL products, the price surge is observed in both low-income and middle-class communities, with no discernible impact on upper-class communities. Our study contributes to the retail exit literature by underscoring the significance of considering socio-economic factors when evaluating the consumer implications of retail store closures. Specifically, our study reveals that low-income communities are disproportionately affected by the price surge after store closures, while store closures have no discernible effect on upper-class communities.