In the years following the corona virus pandemic and the restrictions it imposed on both retailers and consumers, retail enjoyed something like a sugar high: Consumers released from lockdown raced to buy new furniture and clothing and appreciate the hedonic pleasure of shopping for fun (instead of for more masks). But as the years continue to pass, the thrill of shopping in person naturally has begun to wane. In the meantime, rising prices and interest rates intensify consumers’ disinterest in shopping, such that the retail sector appears to be experiencing a rebound to its last rebound.

As consumer spending has dropped precipitously, more than 7,000 stores closed in 2024—the highest number of annual closures since the pandemic. In addition to smaller storefronts, some major corporations filed for bankruptcy, including Rite Aid, Big Lots, and Rue21. The pharmacy sector underwent a massive reorientation, such that all the major chains closed substantial numbers of brick-and mortar stores: CVS Health shuttered 586 locations, Rite Aid closed 408, and Walgreens lost 259. Similarly, dollar stores and specialty retailers, like The Body Shop and Bath & Body Works, faced widespread closures.

Seeking to explain the vastness of the trend, industry observers blame as least some of the problem on competition from affordable, large-scale retailers. Walmart, Amazon, Costco, and Home Depot have taken over their respective supply chains, manufacturing their product assortments on their own, at relatively lower costs, which enables them to reduce the retail prices that consumers see. These big-box stores also have the resources to invest in research and development, which in turn enables them to make faster improvements to the technology that guides their products and supply chains, in an ever-intensifying, virtuous cycle.

The cost positioning they achieve is especially critical to consumers, buffeted with rising costs for big-ticket investments and the inflationary prices of home, credit, and auto loans. Once they pay for their home and car loans, consumers have little money left for non-essential goods. Even relatively wealthy shoppers exhibit prudent, cost-based decision-making these days, prompting Walmart to report an unexpected rise in high-income shoppers. In the restaurant industry, they similarly are seeking more affordable options—or else skipping the trip altogether and just eating what they have at home. Red Lobster, Tijuana Flats, and Buca di Beppo filed for bankruptcy in 2024. Denny’s is set to close 150 locations.

Other factors contribute to these trends as well. Whereas many U.S. consumers received stimulus payments in 2021 and 2022, designed to boost the post-pandemic economy, those payments did not continue thereafter. The continuing rise in popularity of e-commerce does not help physical stores stay open either.

Discussion Questions

1. Might mid-sized retailers lower prices to compete with big-box stores? Is doing so an appropriate long-term solution?
2. With the rise of e-commerce, which types of retailers can and should transition to digital models? Which types will have the most difficulty scaling and integrating e-commerce distribution?

Sources: Aimee Picchi, “Store Closures Have Surged 69% in 2024. Here Are the Retailers Shuttering Thousands of Stores,” CBS News, December 12, 2024; Aliss Higham, “Full List of Major Retailers that Shut Stores in 2024,” Newsweek, December 24, 2024; Nathaniel Meyersohn, “Consumers Reach Their Breaking Point, Forcing Retailers to Shutter Stores at a Worrying Pace,” CNN, October 25, 2024