Consumers reach their breaking point, forcing retailers to shutter stores at a worrying pace

Several major retailers are facing closures this year as shifting consumer habits and economic pressures take their toll. Family Dollar is shutting down 677 stores, Walgreens is closing 259, Big Lots is cutting 360 locations, and LL Flooring is ceasing operations entirely. These closures contribute to a total of 6,189 store shutdowns announced so far, surpassing last year's total.

The retail sector's boom during 2021 and 2022 has ended. Companies have raised prices beyond what many consumers can afford, coupled with soaring interest rates that make borrowing more expensive for large purchases. As a result, consumers are scaling back on non-essential items.

Stiff competition from giants like Amazon and Walmart pressures smaller retailers that lack the financial capacity to keep up with technology upgrades or offer competitive pricing. Years of over-expansion and flawed business strategies are also affecting certain chains. Additionally, the U.S. boasts nearly double the retail space per capita compared to other countries, prompting retailers to downsize.

Store closures echo the pre-pandemic trend when online shopping surged. Over 13,000 stores shut in 2017 and 2018, and around 9,800 in 2019. The early pandemic claimed weaker retailers like Sears and JCPenney. While 2021 and 2022 saw a temporary retail boost, it's proving unsustainable amid rising interest rates and financial strains. 

Restaurant industry shifts mirror retail trends, with consumers favoring at-home dining or cheaper fast-casual options over expensive dining experiences. Casual dining chains like Denny's are closing venues, facing consumer traffic declines.

Discount retailers targeting low- and middle-income shoppers are particularly vulnerable. Walmart's strategic pricing and investments in digital growth have widened the competitive gap, pressuring smaller chains. Family Dollar and Big Lots are among those severely impacted, facing significant closures and financial struggles.

Drugstore chains are also reducing their footprint. CVS, Walgreens, and Rite Aid have collectively shut nearly 945 locations this year. Past overexpansion, coupled with rising competition in pharmaceutical and staple product sales, has led to numerous pharmacy closures.

Despite these challenges, it's not the end for brick-and-mortar stores. The retail landscape is merely correcting and adapting to consumer demand. New entrants are targeting budget-conscious shoppers, with plans for over 5,300 store openings, including those by discount giants like TJX and Aldi, signaling shifts in consumer shopping patterns.