There are signs that retail in the US is on the verge of a major comeback. With the COVID pushback now behind us and the public’s interest in reverting to a pre- pandemic lifestyle, there would seem to be reason for optimism. The National Retailers Federation forecasts that retail sales in 2023 will grow between 4% and 6% over 2022 to between $5.13 trillion and $5.23 trillion. Last year’s annual retail sales grew 7% over 2021 and totaled $4.9 trillion. This growth rate is above the pre-pandemic, average annual retail sales growth of 3.6%. Experts predict that as much as 75% of all retail sales will be in brick-and-mortar stores in 2023 despite the strong on-line presence.
Retail appeared to have rebounded significantly in 2022 in major Jewish communities like Brooklyn, Monsey and Lakewood. While it is true that retail in those communities target a specific audience with special needs, the fact that people are once again enjoying the shopping experience is a good omen for retail in those communities. Retailers in those areas are very optimistic due to population growth and the availability of more disposable income. They are investing into their stores as can be plainly seen driving through those commercial areas. They are increasingly advertising in major Jewish publications and traffic on those streets is on the increase.
On the flip side of the upswing in retail was the recent news that Bath & Beyond, one of the original big box retailers, filed for bankruptcy and will close all its stores nationwide. The retailer is planning to have all its 360 locations, including its 41 California locations, closed by June 30th. They are not alone. One tally finds that as many as 2,119 stores are set to close across the US in 2023. For example, in addition to Bed Bath & Beyond, Foot Locker is shutting 545 stores across two brands by 2026 as part of a shift away from shopping malls, which the retailer believes is no longer a major source of shopping.
The projected store closings in 2023 are a far cry from the record number of shuttered stores in 2020, the COVID year. It is estimated that 12,200 stores closed that year with the number dropping to 5,083 in 2021. When compared to the projections of 2023 of 2119 closings, there is most certainly a downward trend, and a good reason for optimism that retail will have a robust recovery in the coming years.
Flipping through the business pages one gets the impression that 2023 is looking up for the retail sector with an influx of new store openings. Discount chain store Five Below plans to open 200 new stores – the most aggressive expansion plan in the company’s history. It seems that discount stores in general are on the rise, with Dollar General and Family Dollar also reporting new store openings this year. Sam’s Club is set to open 30 new stores in the next couple of years. It is possible that the discount stores face less competition from on-line commerce. In addition, the NRF predicts that smaller footprint stores will flourish as retailers experiment with new formats. Some of the retailers that are experiencing success with their smaller format stores include DSW, Target, and Barnes and Noble. So, while opening large box stores may be passe for now, the brands will continue to be omnipresent in the lives of millions of Americans, albeit in smaller stores.
In addition to smaller footprint stores, other retailers are experimenting with new and creative models. FAO Schwarz, which closed its iconic store on Fifth Avenue is looking to bring its line of toys to a broader audience by partnering with Target. Its nationwide stores and website target.com are set to sell more than 120 FAO Schwarz toys as part of a multiyear agreement. Target also plans to sell a collection of nostalgic toys priced under $25 to celebrate FAO Schwarz’s 160th anniversary, including a Hot Wheels collector set, commemorative Teddy Bear, and more. There is also a great deal of co-branding where two well-known brands co-locate, cutting expenses but sharing the customer base.
Traditional retail is becoming increasingly volatile and challenged as a business model. Brick-and-mortar has shifted to online, while online is shifting into pop-up storefronts. Virtual stores in subway platforms and airports are offering new levels of convenience for harried commuters. These stores are, of course, much smaller than their original models but they still manage to keep their brands in front of their consumer base in any case. These pop-up stores are also popular in many large buildings in Manhattan and in other major cities.
One retail expert summed up the latest retail trends this way: “Retail has always adapted to the environment it operates in. There was a time when retail was from the back of a wagon drawn by horses, then there were stalls on a busy thoroughfare and then most notably the marketplace, which was the forerunner of today’s mall.” He noted that such concepts as “Farmer’s Market” still exist today as do pop-up markets in many areas.
The big unknown in the retail equation is the mall which was one of the primary victims of COVID. Its recovery has been far slower than commercial strips in local neighborhoods. The mall, which relies on healthy traffic, saw that movement slow considerably. They were also victim to on-line as many of the mall stores shifted their emphasis to on-line. Interestingly, there was also an increase in crime in the malls in the last few years which further discouraged traffic.
It’s unlikely that shopping malls will become obsolete. While the rise of online shopping has had an impact on mall traffic, malls are still popular places to shop, and many people enjoy the experience of going to the mall. Mall managers realized that they will have to present themselves as more than shopping. It is common for many of them to feature entertainment, recreation, and special events. American Dream in New Jersey is a good example of a mall that is a major family attraction in addition to shopping.