Despite mounting worries over soaring inflation, increasing borrowing expenses, the psychological aftermath of Russia’s unjust war in Ukraine, and other economic pressures, American consumers displayed remarkable resilience in 2022. This resilience may have appeared as a consequence of the robust labor market in the US, widespread job opportunities, substantial wage growth, and the accumulated savings made by Americans during the pandemic. However, a recent Forbes analysis points to the fact that consumer resilience seems to have reached a critical juncture in 2023 and that retailers must brace themselves for the upcoming consequences.
While not as bad as the dramatic retail catastrophe of previous years, the current situation is undeniably a significant upheaval. According to an analysis conducted by Insider, 2,119 stores are projected to close throughout the US in 2023. The reasons behind these closures are diverse: some companies are navigating bankruptcy proceedings, while others are striving to reduce expenses. Additionally, several retailers are modifying their store formats to align with evolving shopping patterns. These closures will undoubtedly reshape the retail industry in 2023 and beyond, as will the new store openings projected to take place this year.
Why Store Closures Matter
Over 2,100 store closures are anticipated to take place among major retailers this year, with more than a dozen prominent chains announcing their intentions to shut down some locations. Retail giants like Amazon, Bath & Body Works, Walmart, and Foot Locker are on the list of retailers closing stores in 2023. According to the Insider research, Bed Bath & Beyond stands out as the retailer planning to close the highest number of stores in the US this year. After it filed for bankruptcy, the American big box store announced it would close 896 stores across three brands in 2023.
Foot Locker is following closely, embarking on a strategic transition away from shopping malls. The retailer plans to shutter 545 stores across two brands by 2026. Tuesday Morning has also announced it would close its 487 stores, while Bath & Body Works has already made plans to close stores in 50 different locations. However, when it comes to store closures, the reasons behind the decision may prove to be more important for the retail industry than the decision itself. While Bed Bath & Beyond and Tuesday Morning are both going through bankruptcy proceedings, retailers like Foot Locker and Bath & Body Works are undergoing strategic changes.
Store closures have wide-ranging implications for the retail industry, as they can impact financial stability, employment, real estate markets, consumer behavior, and the overall industry landscape. Moreover, they can also point to significant changes within the industry.
Why Store Openings Matter
Just like closures, store openings are vital for the retail industry as they drive business expansion, revenue growth, job creation, customer engagement, brand visibility, and competitive advantage. They can also point to significant changes within the industry, especially if these moves are made by the same retailers that shutting down locations elsewhere. One such example is Bath & Body Works, a retailer that decided to close 50 stores in 2023, while also expanding its business by opening 90 new stores the same year. Moreover, the American retail store chain will also remodel 25 stores.
Bath & Body Works is not alone in planning to open new stores this year. According to Talk Business & Politics, several retailers made similar announcements in the first quarter of 2023. Foot Locker, a retailer that is also closing numerous stores this year, has revealed plans to open more than 300 off-mall stores by 2026. Skechers announced at the beginning of the year plans to open 100 to 120 new company-owned stores in 2023, while Sam’s Club stated its objective to establish 30 new locations by 2027. Costco has also declared its intent to open stores in 15 new locations this year.
According to the National Retail Federation (NRF), dollar stores, off-price retailers, discounters, and wholesale clubs accounted for 43% of the newly announced store openings this year. This seems to point to a change in consumer behavior, suggesting that Americans may need more affordable goods.
The fact that numerous retailers are now investing in new stores highlights their efforts to expand their footprints, explore new markets, and enhance their presence in the industry. However, with 2,119 stores now projected to close throughout the US this year, it is also abundantly clear that the retail industry is still facing numerous challenges. Retailers will need to adapt to the recent changes in consumer behavior and decide which locations are worth investing into, as well as which stores to close. While difficult, these decisions might prove to be vital in the years to come.