Why Are Retail Stores Closing All Over America?

Why are stores closing all across America? Iconic names in the American retail industry, like Red Lobster, Family Dollar, Macy’s, and Walgreens, are set to close in 2024. According to experts, the retail landscape in the US is undergoing a significant transformation. More than 2,000 stores are expected to close this year. This wave of retail closings highlights the change in consumerism, market dynamics, and economic pressures.

Here’s a closer look at the possible reasons behind this surge in shop closures in the US:

1. The Pandemic & the Rise of E-commerce: Is Why Stores Are Closing 

One of the biggest reasons why stores are closing is the growth of online shopping. The concept of ‘contactless shopping’ was initiated during the Covid-19 pandemic. ‘Curbside pickup’ was another term that became frequent during that time. Although the pandemic is over, its effects still loom over the retail sector.

Consumer preferences have shifted, with online shopping taking the forefront. Platforms like Walmart, Amazon, and other niche e-commerce stores have captured a significant market share by offering competitive pricing, a wider inventory, and doorstep convenience.

About 81% of Americans now shop online, a sharp rise from pre-pandemic levels. Similarly, only 36% of Americans purchased groceries online before the pandemic, but that number has since surged to 55%. These figures show a considerable decline in foot traffic in retail stores. Additionally, this has left brick-and-mortar stores struggling to justify their operational costs. Now, retailers have only two choices- adapt or shut down permanently.

Here are insights: Why Stores Are Closing 

• Retailers like Foxtrot, which failed to evolve its digital presence, closed physical stores in all 33 locations after failing to meet the sales targets.

• Similarly, Rite Aid, still dealing with the pandemic’s financial fallout, is closing down stores—77 locations planned for 2024 after shutting 150 stores last year.

2. Low Profit Margins & Purchasing Power Due to Inflation is Why Stores Are Closing 

Inflation has been a critical factor in why stores are closing across America. In October 2024, the US inflation rate climbed to 2.6%, up from 2.4% in September. The cost of fuel, energy, and labor has steadily risen, tightening profit margins. Low profit margins have forced many retailers to reevaluate their physical stores, especially in the retail sector. For instance, Conn’s Home Plus has filed for bankruptcy and is in the process of closing 71 stores across 13 states this year due to these rising costs.

On the consumer’s end, higher living costs and declining wages have eroded their purchasing power. As a result, essentials are prioritized over discretionary spending.

• Take Family Dollar, for example. Its core customer base has been under financial strain, leading the company to announce plans to close 677 stores in 2024. Many more stores that are closing may follow as leases expire.

3. Changing Shopping Patterns

Consumers have quickly adopted digital and hybrid shopping models. Earlier, consumers mostly flocked to malls and flagship stores to shop for things. However, online shopping has become dominant due to its benefits, like doorstep delivery, exchange/return policies, etc.

Brands that quickly adopted omnichannel strategies have thrived. However, those who couldn’t adapt have faced challenges.

• Express, an American clothing retailer, will close 95 flagship stores and all 12 Up West locations in 2024 due to declining sales and shifting consumer preferences.

4. Industry-Specific Challenges

Every industry has its own challenges. Let’s look at the brick-and-mortar stores closing in dining and entertainment sector.

Sam Ash Music, a retailer of musical instruments, is closing 18 stores in 2024, primarily due to declining demand for in-store purchases as consumers increasingly turn to online platforms for their music equipment needs.

Similarly, Red Lobster is closing around 48 locations this year, highlighting financial issues in the restaurant industry. Inflation has increased operational costs, which has caused final food prices to rise and forced customers to reduce their outdoor dining experiences.

The Road Ahead 

The list of stores closing continues to expand. In 2024, Walgreens is set to shut down 259 stores, Big Lots is closing 360 stores, and Macy’s is shutting down 50 locations. This is a critical point in the US retail industry. It is important for brands to strategize smartly and adapt to the “new normal.” It is imperative to invest in e-commerce & innovate to better engage customers.

The retail sector is not dying; it’s transforming. This is a wake-up call for retailers to embrace changes so that they can continue catering to the evolving needs of US consumers.