Retailers had a challenging start to 2025, dealing with the mounting pressure of inflation and changing trade laws.
Store closures have skyrocketed recently, and a report from Coresight Research projected that there will be a total of 15,000 stores closing down in 2025, up from 7,325 in 2024. Additionally, major US retailers have announced 29.6% fewer openings and 334.6% more closures compared to the year prior.
Some of the major retailers, including CVS, Walgreens, Family Dollar, and Big Lots, have had mass closures over this year. Retail Gazette US takes a look at the reasons behind the store closures and how it’s reshaping the American retail landscape.
Streamlining underperforming locations
As the costs of rent increase and inflation weighs in on brick-and-mortar retail, companies are closing down underperforming locations to invest in better-performing stores. This is one of the most common reasons cited by retailers shuttering stores including Walgreens and J.C Penney. Pharmacy retailer CVS announced its plans to close 270 stores as it aims to streamline its fleet. The company commented: “We’re focused on ensuring we have the right kinds of stores and the right number of stores in the right locations.”
Retailer Macy’s also announced its plans to close down 66 stores as part of a broader strategy to remove underperforming locations. Tony Spring, chairman and CEO of Macy’s, said: “Closing any store is never easy, but as part of our Bold New Chapter strategy, we are closing underproductive Macy’s stores to allow us to focus our resources and prioritize investments in our go-forward stores, where customers are already responding positively to better product offerings and elevated service.”
Kohl’s is another retailer reevaluating its fleet, closing down approximately 27 stores as it aims to strengthen its business long-term. This move may help retailers allocate their resources to the well-performing locations, which can improve retailers’ financial earnings amid a challenging market.
The rise of e-commerce
Consumer trends and preferences are shifting, e-commerce retailers and online shopping are gaining popularity. Online shopping increasing in popularity disadvantages traditional brick-and-mortar retailers, who are struggling to compete with the convenience that e-commerce retailers provide. A recent survey by NerdWallet revealed that 54% of consumers state that convenience is the most important factor when making purchases, which may be a reason for the rapid rise in online shopping.
Traditional brick-and-mortar retailers may find it difficult to adapt to the increase in e-commerce businesses, with fast fashion giant Forever 21 previously blaming online fast fashion giants such as Shein and Temu for its bankruptcy.
Brad Sell, CFO of Forever 21, had previously commented: “While we have evaluated all options to best position the company for the future, we have been unable to find a sustainable path forward, given competition from foreign fast fashion companies, which have been able to take advantage of the de minimis exemption to undercut our brand on pricing and margin.”
Randa Kriss, NerdWallet small business expert, commented on how brick-and-mortar retailers need to adopt an omnichannel approach to maintain profits amid an increasing preference for online shopping.
Kriss commented on how retailers can respond: “Online shopping often offers the best prices, personalized marketing, and seamless experiences — all things that consumers are currently looking for.
“While we’re not seeing a complete structural shift away from brick-and-mortar retail, we are indeed seeing a correction. If retailers want to survive, they’ll need to evolve. They have to adapt to what today’s consumers are looking for: personalized shopping experiences, strong customer service, and fast, convenient access to products.”
The mounting pressure from online retailers can lead to brick-and-mortar retailers expanding their promotions and discounts, which leads to a weaker overall performance.
Tim Hynes, Head of Global Credit Research, Debtwire, commented about the increasing competition affecting overall profits: “The retail landscape is fiercely competitive, with both traditional and e-commerce players vying for market share. This often leads to price wars, forcing retailers to offer promotions and discounts to attract customers, further eroding margins.”
The rise of retail crime
More shoppers are opting out of buying from traditional brick-and-mortar stores and turning to online shopping due to worries about in-store retail crime. This aligns with research from Flock Safety and Zencity. The results revealed that a third of shoppers view retail crime as a serious issue and 58% prefer online shopping due to safety concerns. Retail crime in the US causes shoppers to shift their spending habits to online businesses, creating a disadvantage for traditional brick-and-mortar retailers.
Michael Simon, chief strategy officer at Zencity, commented: “American consumers want to feel safe while shopping and are eager for retailers to adopt new technology to restore a safer, more welcoming, and more convenient shopping experience. It stands to reason that retailers who recognize this trend in public opinion and take action will be better positioned to encourage more in-store shopping from their customers.”
Shoppers are prioritizing their safety amid retail crime inching up in the US, with e-commerce shopping providing a safer alternative and thus affecting the durability of physical stores.
Inflation and rising costs
Closing down stores is a move that many retailers seem to be making to offset the increasing losses from inflation and rising rental prices. Additionally, US consumer confidence has been declining for four consecutive months and only recently increased from 12.3 to 98.0 in May, which has slowed down operations for retailers across the US.
Discount retailer Dollar General announced its plans to shut down close to 100 stores as it streamlined its operations and blamed the changing macroeconomic environment for its decision to downsize.
Kelly Dilts, EVP and chief financial officer of Dollar General, commented: “While our guidance is centered around a macro-neutral outlook, the full range does recognize that there is still uncertainty both in the broader macroenvironment as well as for our core customer. We are currently anticipating continued economic pressure on our core customer, though at a relatively consistent rate to what they were experiencing as we close 2024.”
Foot Locker also announced plans at the beginning of the year to shutter around 100 stores in 2025 as part of its broader turnaround strategy after bringing in losses in its recent financial earnings.
Hynes commented on how inflation is shaping consumer spending habits: “Consumers are feeling the pinch from lingering inflation and high interest rates. Many have depleted savings or accumulated credit card debt, leading to more cautious and value-driven spending. There is a notable shift away from discretionary goods, such as home furnishings, towards essential items and experiences.”
This aligns with results from a survey by Zappi, which revealed that 91% of shoppers are changing their shopping habits to offset tariffs. Decreased spending leads to lower foot traffic for brick-and-mortar retailers, which drives retailers to close down their stores.
Moving forward, we can anticipate more store closures if retailers do not find methods to adapt to the new retail landscape and shifting consumer preferences. Consumer sentiment is showing signs of improvement; however, retailers have to face the challenge of changing trade policies, which will cause them to rethink their brick-and-mortar fleet strategy.
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