Pandemic deals severe blow as 2,400 big-box outlets across country close
People go into a Bed Bath & Beyond store for a clearance sale in Garden City, New York State, on April 24. (PHOTO / CHINA NEWS SERVICE)
Editor's note: As the retail sector in the United States suffers from various setbacks, including failure to fully reckon with the rise of online shopping, this page takes a close look at how the country's retailers are going through such a tough time amid a slowing economy.
The aisles with big blue signs, lined with perfumed bath salts, floral sprays and bedding and home goods, offered Bed Bath & Beyond shoppers low prices on everyday essential items.
However, the retail store chain, established in New Jersey in 1971 and expanded to all 50 states, filed for bankruptcy in April. It planned to close all 400 stores by June 30. Some stores still remain open as they liquidate inventory.
The closures reverberated throughout the US retail sector, as Bed Bath & Beyond had been popular with customers in California, Texas, New Jersey and Florida. Yet, since late last year, signs of strain were there.
The pandemic was a pressure test for all retailers, and it left some weakened. In the meantime, inflation, ongoing labor shortages, retail theft and other challenges haven’t loosened their grip.
Carol Spieckerman, president of consultancy company Spieckerman Retail in Arkansas
"Bed Bath& Beyond made a series of really bad mistakes," said Paula Rosenblum, co-founder of retail advisory company Retail Systems Research in Florida and a retail technology specialist with more than 20 years of experience.
"There was a lot more beyond than there was bed and bath. I have personal experience of this. They did not have what people wanted.
"The founders, before they retired, had a philosophy that we should never be out of the things that customers want. But they did not have very good merchandise," Rosenblum told China Daily.
Bed Bath & Beyond is among nearly 2,400 big-box, brick-and-mortar stores that used to be staples in malls around the country but will close, according to Business Insider.
Several other big names, including CVS Pharmacy, Nordstrom, Foot Locker, Gap, Whole Foods, Starbucks and Walgreens, all announced they will close underperforming locations that have fallen out of favor with shoppers looking for bargains.
Carol Spieckerman, a global retail analyst and president of consultancy company Spieckerman Retail in Arkansas, told China Daily: "The pandemic was a pressure test for all retailers, and it left some weakened. In the meantime, inflation, ongoing labor shortages, retail theft and other challenges haven't loosened their grip."
Some stores have lost customers to the convenience of online shopping. Between 2019 and 2021, amid the COVID-19 pandemic, at least 27.6 million people worked from home, according to data from the US Census Bureau. It led to more people shopping online.
E-commerce stores had 14.7 percent of all retail sales in the last quarter of 2022, the Census Bureau said. And the sector looks set to grow more, say analysts.
But "online shopping won't replace stores", Spieckerman said. "In fact, retailers like Walmart have proved that stores are a major benefit to their online businesses. A wave of digital innovation is set to launch in physical stores that will make brick and mortar shopping far more engaging."
Now, three years after the outbreak of the pandemic and as some employees return to offices, the fallout from workers not shopping for years in areas near their workplaces has been laid bare.
Nicholas Bloom, a Stanford University economist, found the amount of money that an office worker spent in downtown areas dropped by around $2,000 to $4,600 per year.
CVS Health, which often has pharmacies located near office buildings, said in 2021 that it would close 900 stores nationwide up until 2024.
Another big chain store, Target, said it will close four locations in areas that used to get foot traffic from office workers. Two locations are in Washington, one in Philadelphia, and one in Minneapolis. However, it will open 20 new stores in other areas to "reach new guests", the company said.
The company plans to invest $4 billion to $5 billion this year to expand guest-centric services, operations and its digital experiences.
On the plus side, Rosenblum believes that Walmart and Target have made the biggest strides with "buy online and pick up at the curb, or buy online and pick up in the store".
As people leave the confines of home for work, consumers are buying less clothes and fewer home goods, research by Jonathan Bowles from the Center for an Urban Future showed.
Gap, a casual clothing brand, announced in 2021 that it will close 350 of its Banana Republic and Gap stores this year. Last year, Gap had 912 stores; it will have 866 by the end of this year.
In March, Foot Locker, which sells sneakers and sports apparel, said it planned to close 420 stores by 2026. It also plans to shut 125 Champs Sports locations. Instead, it will open 300 smaller stores.
From 2019 to 2021, the lack of shoppers in downtown areas led San Francisco to lose 6 percent of retail stores, according to the JPMorgan Chase Institute.
Repeated pattern
The pattern was repeated in Los Angeles, which lost 4 percent of its stores, and New York, which lost 3 percent.
The shops moved to cities such as Houston, JPMorgan Chase Institute found. Its data showed that Houston and Phoenix got 4 percent more new retail businesses at the same time.
In pursuit of those shoppers, some stores decided to move from major metro areas to the suburbs or smaller towns.
One of the reasons that smaller towns are attractive to store owners is that the rent is generally lower compared with large cities.
In San Francisco, rent for retail spaces was $43 per square foot, according to Cushman and Wakefield, a commercial real estate company.
In Los Angeles, it was $33 per square foot, and in New York, $32. But in Phoenix, Houston and Dallas, rent for retail space was between $22 and $23 per square foot.
The discount chain Big Lots announced it will close four stores in Colorado and three in California and move to smaller towns.
CFO Jonathan Ramsden said on a December earnings call, "Our real estate strategy is going to be increasingly oriented toward these rural small-town stores."
However, in a reversal of the trend, Lidl, a German discount grocery chain, closed five locations in four states — New Jersey, North Carolina, South Carolina and Virginia.
Lidl is going to larger cities, as it recently opened stores in Brooklyn, New York, Washington, and Greensboro, North Carolina.
Some of the country's largest department stores have not fared well either amid changing times.
Macy's will shut 125 stores in malls this year. It has already closed four stores in California, Colorado, Hawaii and Maryland.
JCPenney closed 150 stores since 2020. It will close stores in the states of New York and Indiana this year.
Nordstrom, a luxury department store, will close 15 locations this year in the US and Canada, including two in San Francisco.
The exhaustive list of stores that have been closed show that no store, big or small, innovative or traditional, has been able to escape the downturn.
Amazon Go, the online retailer's brick-and-mortar store, is set to close nine stores this year — two in New York, three in Seattle and four in San Francisco. The stores have no checkout counters; they are all automated.
Retailers are increasingly using less staff as they put in self-service checkouts. The average number of staff members in a store has fallen from 10.9 employees before the pandemic began in 2020 to 10.1 this year, according to data from the Center for an Urban Future in New York.
The lack of staff has caused retail jobs in New York to be down by 11 percent in the same period in 2020, the center found. Manhattan was particularly hard hit, with a 20 percent drop.
While some shoppers enjoy less interaction with staff, not everyone believes that automation gives the customer the best in-store experience.
Bob Phibbs, a retail expert with more than 20 years' experience and CEO of the Retail Doctor based in New York, believes that retailers must make it easier, not harder, for shoppers to have a seamless experience in a store especially when checking out.
"If I have to go through, check myself out, help myself out in the store, why am I going to a brick-and-mortar store?
"Everyone might say this is a good idea, but you have to ask, 'Is this making it more convenient or is it a way to make the shopper do more?' I always applaud Walmart for trying new things, but I hate those (self-service checkout) things," he told China Daily.
Organized crime
Big-box stores and pharmacy chains also are coping with the impact of organized retail crime on their businesses. Merchandise stolen on a large scale by gangs of thieves often is resold.
In San Francisco, robbery has increased by 12 percent this year compared with last year, the San Francisco Police Department said.
Walgreens initially blamed crime as the reason for closing five stores in San Francisco in 2021, but it has since backtracked.
The pharmacy chain has around 9,000 stores throughout the country. But at one of its San Francisco stores, photos and video posted online show freezers full of ice cream have been padlocked to deter thieves. Some staffers said thieves come in about 20 times a day to steal goods.
Thefts, called retail "shrink", reached $94.5 billion in 2021, up from $90.8 billion from 2020, according to the National Retail Federation.
Walgreens announced it would close 150 stores in the US and 300 in the United Kingdom this year to save money. It has already reduced store hours and trimmed corporate jobs in a first round of cuts. It said it wants to reduce $800 million in costs by 2024.
It said third-quarter earnings would be lower in part because it was no longer doing as many COVID-19 vaccines and tests as before. US President Joe Biden announced in April the COVID-19 national emergency response had ended.
San Francisco is losing other big names after Whole Foods closed its flagship store after staff members were assaulted; a machete-wielding man showed up; and a man overdosed from fentanyl in a bathroom. Tech staffers continuing to work from home also affected the store's traffic.
Office Depot and Anthropologie will follow suit and leave.
In New York, police said nearly one-third of all shoplifting arrests last year involved just 327 people.
The theft of items under $1,000 last year went up by 53 percent since 2019, researchers at the John Jay College of Criminal Justice found. Total revenue lost to retail theft was $300 million.
New York City Mayor Eric Adams lamented the thefts, saying in February, "We're losing chain stores that are closing down because of crime."
Fewer new constructions
Across the country, the amount of new construction for commercial spaces was particularly low in 2022 for the third consecutive year, said the real estate company Coldwell Banker Richard Ellis, or CBRE, in California.
It fell 4.9 percent at the end of 2022, the lowest level since CBRE began tracking the market in 2005.
Some empty Bed Bath & Beyond retail spaces will be used by TJ Maxx, Home Goods and Ross.
Yet, despite a raft of problems in the retail sector, retail sales in June were up 1.5 percent this year compared with the corresponding period in 2022, according to the Census Bureau.
Rosenblum from Retail Systems Research cautioned against thinking a "retail apocalypse" will ruin all of the big-box stores.
"The death of stores was always overblown," she said. "The sociology of shopping here is fairly straight forward; if you want people to come to malls, you have to give them a reason beside stores."
Retail analyst Spiekerman agreed: "Big-box retailers are coping quite well under the circumstances. To be successful, retailers must focus on providing choices across convenience, price and offer multiple checkout options ensuring that retailers can engage a wide range of shoppers."
In the future, city centers in New York and malls in states such as Florida will need to transform to win back lost customers, analysts say.
"Malls have to do a better job of giving customers a reason to go besides the anchor stores," Rosenblum said.
"When malls were in their glory days, they used to have rock concerts. People would go to the mall and bring their beach chairs and sit down … There's a social element to the mall that has to be recaptured."
US cities are putting plans in place to make downtown areas more accessible to shoppers by creating more room on sidewalks, widening bicycle lanes and reducing traffic.
In New York, the mayor wants to redesign Fifth Avenue, the luxury shopping street, by reducing traffic and widening sidewalks to encourage more pedestrians.
In San Francisco, the Public Realm Action Plan by Sitelab Urban Studio for the Downtown SF Partnership, has called for the "doom loop" of downtown to be transformed with art, food, pop-up stores and shows.
Rosenblum said a series of developments could also entice people back to malls in Miami.
"Somebody is building a mall in Miami, and they are going to put a ski slope in it. Then someone else is going to put a pickleball court in the middle of one. That's quite a clever idea," she said.
