During the 2024 holiday season, retail spending increased due to a rise in consumer sentiment and positive macroeconomics. However, there is some concerning news as well.
According to Coresight Research’s latest Store Tracker report, it is estimated that in 2025 there will be three times more retail closures than openings. The analysts at Coresight predict that approximately 15,000 stores will close while only about 5,800 new stores will open during this time period.
Despite this gloomy forecast for retailers, the U.S. economy is expected to become more resilient with low interest rates and a strong labor market leading to optimism for robust retail spending in 2025.
However, retailers are facing challenges from various factors such as fierce competition from e-commerce players like Shein and Temu; concerns about inflation which could put pressure on lower-income consumers; and a shift towards services rather than goods when it comes to discretionary spending.
The Store Tracker also highlights specific sectors within the retail industry that are experiencing changes:
– Apparel: While many apparel stores have closed down recently due to changing consumer preferences and increased competition from online retailers like Shein and Temu; off-price apparel stores continue opening up.
– Department Stores: This sector has seen store closures (Kohl’s & Macy’s) as well as mergers (JCPenney & SPARC). Inflationary pressures have led these companies towards alternative formats of selling their products.
– Discount Stores: Despite some recent closures by Big Lots &99 Cents Only Stores due company-specific reasons; discount stores are expected see long-term growth.
– Drug Stores: Retail pharmacies have been hit hard by changing consumer preferences along with increasing digitalization of shopping habits. This trend may lead “pharmacy deserts” across America which would benefit national merchants such Costco or Walmart along with regional chains including Kroger , Publix , Hy-Vee , Albertsons .
– Home-Related Categories: Due to a subdued housing market, home goods, furniture and appliances sales have decreased. However, with an expected increase in home sales in 2025; there will be more demand for big-ticket categories.
In conclusion, while the retail industry is facing some challenges such as increased competition from e-commerce players and concerns about inflation; there are also opportunities for growth especially in sectors like discount stores and home-related categories.
