In a year marked by soaring inflation and a wave of bankruptcies, the struggling retail industry has seen the closure of nearly 3,200 brick-and-mortar stores across the United States— a staggering 24% increase from last year. While some retailers plan to expand in 2024, major chains have announced a 4% decrease in new store openings compared to 2023. Changing consumer habits, management issues, and bankruptcies have contributed to this downward trend, impacting companies such as Rite Aid and Rue21.
Dollar Tree made headlines earlier this year when it announced the closure of over 600 Family Dollar stores. Citing the effects of inflation on customers and increasing shoplifting incidents, the discount store leads the pack in store closures for 2024. Consumers’ spending habits remain solid, yet there are emerging “pockets of softness” in the market, which has forced retailers to optimize their store portfolios to maintain their financial soundness, as explained by Neil Saunders, managing director of GlobalData.
Traditional brick-and-mortar stores continue to suffer at the hands of online competitors like Amazon. However, some companies have made strategic errors, such as the Express clothing chain. Despite retaining a long-standing reputation for fashionable work attire, the brand failed to adapt to the shift toward remote work as a result of the pandemic. Consequently, Express filed for bankruptcy last month, with plans to shutter 100 of its 500 locations.
Although Americans are still spending, economists observe a gradual slowdown in consumer spending growth. The University of Michigan’s Surveys of Consumer sentiment index for May dropped to its largest monthly decline since 2021. According to Jeffrey Roach, chief economist for LPL Financial, this dip in confidence is due to heightened concerns over inflation and decelerating growth. Economists warn that this uncertainty could suppress spending in the coming months.
Simultaneously, any surplus cash from the pandemic era— when federal stimulus checks and other benefits bolstered bank accounts— is dwindling. As households exhaust their accumulated savings, a decline in discretionary spending looms on the horizon.
Despite the concerning trends, some retailers are forging ahead with growth plans. Dollar General, Family Dollar’s rival, intends to open more than 800 new locations in 2024. Other retailers such as 7-Eleven and discount store Five Below plan to open numerous outlets as well.
In sum, as brick-and-mortar retailers grapple with changing consumer habits, increased competition from online retailers, and this turbulent economic landscape, it is clear that strategic adaptation is crucial for survival. The retail industry must be proactive in optimizing its store portfolios, remaining financially sound, and addressing the dynamic needs of the consumer base. Otherwise, more store closures loom large, and the retail landscape of America will continue to transform.
