The Retail Meltdown

Introduction: A Wave of Store Closures

American retail is experiencing a wave of store closures unlike anything seen in years. From big-box chains to specialty boutiques, thousands of brick-and-mortar stores have shuttered as companies struggle to stay afloat. In 2024 alone, U.S. retailers closed over 7,300 stores – the highest annual total since the pandemic – marking a 69% jump in closures from the previous year. And the trend is only accelerating: industry analysts project up to 15,000 store closures in 2025, more than double the 2024 count. This “retail meltdown” spans all sectors and regions, leaving empty storefronts in malls, shopping plazas, and city centers across America.

What’s driving this dramatic shakeout? In truth, multiple forces are converging to squeeze traditional retailers. Economic pressures – from high inflation that dents consumer spending to rising interest rates that make debt unaffordable – have hurt many store chains. At the same time, online shopping and shifting consumer habits are pulling foot traffic away from physical stores. Retailers are also grappling with higher operating costs, from labor to rent to theft, which erode thin profit margins. The result is a perfect storm that has pushed even established retail brands into downsizing or bankruptcy. Below, we break down the major factors behind the recent store closures and examine some of the most notable retail casualties of 2024–2025.

Notable Retailers Shutting Doors (2024–2025)

To grasp the scope of the retail meltdown, consider a few prominent chains that have recently closed large numbers of stores or gone out of business entirely:

• Bed Bath & Beyond – The home-goods retailer filed for bankruptcy in 2023 and closed all of its stores for good by June 30, 2023, ending an era for its 360 flagship stores and remaining Buybuy Baby outlets. The company, once a go-to for housewares, was unable to recover from mounting losses and competition after years of declining sales.

• Party City – This party supplies chain, synonymous with balloons and Halloween costumes, declared bankruptcy twice (first in early 2023, then again in late 2024) and is now shuttering all of its stores after nearly 40 years in business. Party City’s CEO said the company faced “an immensely challenging environment” with inflationary pressures driving up costs and consumers pulling back on party spending.

• Rite Aid – One of America’s largest drugstore chains, Rite Aid entered a steep decline and filed for Chapter 11 bankruptcy in late 2023. By 2025 it sought court approval for a complete liquidation or sale of all its ~2,000 pharmacies, effectively ending the chain. Rite Aid had been burdened by billions in debt and was squeezed by heavier competition from rivals like CVS, Walgreens, Walmart, and online pharmacies.

• Joann (Jo-Ann Fabrics) – The 80-year-old fabric and crafts retailer filed bankruptcy in early 2025 and is in the process of closing all 800 of its stores nationwide. Joann initially hoped to keep some stores open, but after failing to find a buyer to rescue the business, it commenced going-out-of-business sales at every location. The company had briefly enjoyed a pandemic crafting boom, but then saw sales plummet and couldn’t service its debts amid competition from online sellers and big-box craft rivals.

• Big Lots – A discount furniture and housewares chain catering to budget shoppers, Big Lots filed for Chapter 11 in September 2024 and began liquidating inventory. The company at first announced that all remaining stores would close, though a deal struck in late 2024 may keep a couple hundred stores open under new ownership. Big Lots had expanded rapidly, but high inflation hit its low-income customer base hard and left the chain with unsold inventory and cash flow problems.

These examples are just the tip of the iceberg – other familiar names like Tuesday Morning (home goods), Christmas Tree Shops (seasonal decor), and regional department stores also shut down during this period. Even healthy retailers like Macy’s and CVS have been pruning underperforming stores to adapt to the new environment. In short, no corner of retail has been completely immune to the upheaval. The following sections explore the key factors fueling this retail contraction.

Inflation and Consumer Spending Squeeze

One major culprit behind store closures is the recent surge in inflation and the resulting squeeze on consumer spending. After years of relatively low inflation, prices spiked dramatically in 2021–2022, reaching 40-year highs. By mid-2022 inflation peaked at over 9%, driving up the cost of everything from food to fuel. Although inflation has moderated since, it remained elevated through 2023, meaning consumers are still paying considerably more for basic necessities than they did a few years ago.

When household budgets get stretched by higher prices on essentials, discretionary spending shrinks – and retailers that sell non-essential goods feel the pain. During the pandemic, consumers had splurged on home goods, furnishings, electronics, and hobbies while stuck at home. But as stimulus savings dried up and prices rose, shoppers pulled back on these discretionary purchases, especially in categories that had boomed earlier in the pandemic. This “hangover” from the pandemic spending spree has hit retailers in home décor, furniture, and electronics particularly hard, leading to sales declines and, in many cases, store closures or bankruptcies. For example, Bed Bath & Beyond and Tuesday Morning – both home goods retailers that saw a pandemic bump – experienced steep sales drops once consumers reverted to normal spending patterns, contributing to their collapse.

At the same time, high inflation drives up operating costs for retailers. Merchandise wholesale costs increased, and many chains faced higher expenses for transportation, utilities, and supplies. Retailers had to choose between passing those cost increases to consumers (which risked further dampening sales) or absorbing them and hurting their profit margins. Party City cited this inflationary squeeze explicitly: after trying to weather rising supply costs and a dip in customer spending on parties, the chain acknowledged it could not continue in “an immensely challenging environment driven by inflationary pressures on costs and consumer spending”. In short, inflation has created a tougher climate where stores sell less and pay more – an unsustainable combination for weaker retailers.

High Interest Rates and Debt Burdens

Compounding the inflation problem is the rapid rise in interest rates over the past two years. To fight inflation, the U.S. Federal Reserve raised benchmark interest rates from near 0% in early 2022 to around 5% by 2023 – the fastest increase in decades. These higher interest rates have broad effects on retailers. For one, it becomes more expensive to borrow money. Retailers often rely on credit lines to buy inventory or on loans to open new stores and upgrade old ones. As rates jumped, the cost of servicing debt ballooned, and access to new credit tightened for less-profitable companies.

The retailers that were already carrying heavy debt loads have been especially vulnerable. Many chains took on significant debt in the past – whether to finance expansions, buy out competitors, or as a result of private equity leveraged buyouts. Now the bill is coming due. Rite Aid, for example, struggled under a debt pile of over $3 billion and could not refinance its loans affordably once rates rose. The company’s first Chapter 11 filing in 2023 helped shed some debt, but it still had $2.5 billion of obligations when it emerged – and ultimately, “high debt, inflationary pressures and increased competition” proved too much, forcing Rite Aid into bankruptcy again in 2025. Numerous other retailers with large debts – from Joann (whose private equity owners had saddled it with loans) to Party City – found themselves unable to pay creditors as sales fell, leading them to seek bankruptcy protection and close stores.

In fact, industry data show a strong link between heavy debt and recent retail failures. In 2024, over half of the major U.S. bankruptcies (companies with $1B+ in liabilities) were at private equity-backed retailers, and in the first quarter of 2025 that trend only worsened. Seven out of ten big bankruptcies early in 2025 involved companies owned by private equity firms – firms that often load retailers with debt and then “pull back” on further investment if the business falters. When interest costs climbed, these debt-laden retailers had little cushion to survive. Put simply, the era of cheap money ended, and with it ended the viability of many overleveraged store chains.

High interest rates also chilled consumer spending on credit, which indirectly hurt retail sales. Shoppers saw credit card interest rates soar to record highs (often 20%+ APR), making them think twice about carrying balances for big purchases. Financing for big-ticket items like appliances or furniture became pricier, which could deter some buys. In this way, rising rates created a more cautious consumer and a harsher financial landscape for retailers – a double whammy that has contributed to the closure wave.

The Rise of Online Shopping and Digital Competition

It’s impossible to examine store closures without acknowledging the continued rise of e-commerce. Americans have been steadily shifting more of their spending online, and that trend accelerated dramatically during the COVID-19 pandemic. Even as in-person shopping resumed, many consumers have retained their online shopping habits for convenience and price reasons. By late 2024, online sales accounted for roughly 16% of all U.S. retail sales, up from about 11% in 2019. In other words, a significant share of retail dollars has migrated to websites and apps – and away from physical storefronts.

This competition from e-commerce has put intense pressure on brick-and-mortar retailers, especially those that failed to develop strong online channels of their own. Consumers today can compare prices with a click and often find better deals or wider selection on sites like Amazon than in local stores. The result is that many traditional retailers have lost sales to digital rivals. Joann, for example, saw its market share steadily eaten away by online retailers and more efficient brick-and-mortar competitors – customers buying craft supplies on Amazon or Etsy, or opting for one-stop craft superstores like Hobby Lobby and Michaels. That loss of shoppers contributed to Joann’s financial decline. Similarly, Bed Bath & Beyond struggled as home goods buyers turned to Amazon, Wayfair, and other online options; the convenience of free shipping to your door undercut Bed Bath’s once-formidable advantage of abundant in-store coupons.

It’s not just Amazon, either. New online-only upstarts have emerged, offering rock-bottom prices that physical retailers can hardly match. Fast-fashion and bargain sites like Shein and Temu (popular for apparel and assorted goods) have exploded in popularity, underpricing mall stores on items like clothing, accessories, and home knickknacks. The onslaught of these e-commerce players has “pressured niche retailers”, who suddenly find themselves undercut by global online marketplaces. The Washington Post noted that many specialty retail chains are grappling with the one-two punch of a post-pandemic sales slump and competition from giants like Amazon and Walmart, as well as aggressive e-commerce sites like Shein and Temu. In categories from party supplies to electronics to books, the shift to online shopping has reduced the customer traffic and sales volume needed to sustain large networks of physical stores.

Even retailers that are succeeding with e-commerce have sometimes opted to reduce their physical footprint. As more sales move online, chains can serve the same demand with fewer stores (augmented by delivery or curbside pickup). For instance, Foot Locker announced plans to close many mall stores as it retools its strategy, recognizing that younger customers are buying sneakers through apps and websites. CVS and Walgreens have also been closing some stores as more pharmacy orders shift to mail delivery or digital fulfillment. In short, every retailer today must reckon with the digital revolution in shopping – and many older business models simply haven’t survived the transition, leading to store closures across the country.

Changing Consumer Habits and Declining Foot Traffic

Hand-in-hand with the e-commerce boom are broader shifts in consumer behavior that have reduced foot traffic to many stores. Americans today shop differently than they did a generation ago, and these changing habits have challenged the traditional retail format.

One big change is where and how people choose to shop in person. Many consumers now favor quick, convenient trips (for example, stopping by a local Target or Dollar General) or shopping as needed, rather than spending hours roaming large malls or department stores. The era of the weekly trip to the mall has waned; today’s shoppers are more mission-oriented or they are shopping virtually. The COVID-19 pandemic accelerated this shift – when malls and stores shut down in 2020, people found alternatives, and some never returned to their old routines. Even as of 2024, foot traffic in many retail locations had not fully recovered to pre-pandemic levels. Analysts noted that by late 2024, foot traffic in prime shopping areas was only just reaching 2019 benchmarks, and in some secondary markets it remained lower. This means fewer bodies walking past stores, fewer impulse buys, and ultimately less sales for brick-and-mortar retailers.

A key factor is the remote work and urban foot traffic decline. With more people working from home or on hybrid schedules, downtown business districts and urban shopping corridors have seen less daily foot traffic. Stores that once relied on office workers dropping in during lunch or rush hour have suffered. A striking example is Downtown San Francisco, where several major retailers closed stores in 2023 due to a dearth of shoppers. Nordstrom, which closed its flagship San Francisco department store after 35 years, explained that “the dynamics of the downtown market have changed dramatically... impacting customer foot traffic to our stores and our ability to operate successfully”. In that city and others, companies cited a combination of remote work emptying out the weekday crowds and concerns about public safety keeping some shoppers away. The result was too little foot traffic to justify expensive leases. Nordstrom’s exit, alongside other closures, underscored how dwindling foot traffic and changed consumer patterns can make a previously viable store untenable.

Consumer preferences have also shifted toward spending on experiences over things in recent years – especially among younger generations. Money that might have gone to apparel or home décor is now being spent on travel, dining out, or entertainment (areas that saw a surge as pandemic restrictions eased). Government data shows that the share of consumer wallet going to physical goods has largely reverted to its pre-pandemic norm by the end of 2024, as spending on services (like restaurants and travel) climbed back up. For retail stores, this means they are competing for a smaller slice of consumers’ discretionary dollars than during the peak of the pandemic when options were limited. Many people also adopted a mindset of decluttering and minimalism, reducing demand for the kinds of miscellaneous merchandise that fills many stores.

All these habit shifts – less recreational shopping, more online purchasing, more home-bound lifestyles – translate into lower foot traffic in many retail locations. Shopping malls have been hit hardest. The U.S. was arguably “over-malled” in the past (there were 1,200 malls as of 2022), and now many of those malls are struggling to attract crowds. As a result, malls had an 8.7% vacancy rate at the end of 2024 (more than double the average retail vacancy rate), and that year saw a net loss of roughly 2,380 stores within malls (9,260 mall-based store closures versus 6,880 openings). Mall traffic tends to concentrate in a few high-performing centers, while weaker malls enter a downward spiral of fewer shoppers and more empty stores. The broader point is that consumer behavior has evolved – and retailers stuck with too many stores in locations that people no longer frequent are now pulling back dramatically.

Rising Operational Costs (Labor, Rent, and Theft)

Another set of factors driving store closures relates to the operational costs of running brick-and-mortar retail – costs that have been rising and eroding profitability. Chief among these are labor and rent.

Retail is a labor-intensive business: stores need staff on-site to stock shelves, assist customers, and man the registers. But since the pandemic, retailers large and small have faced a labor crunch. Many frontline retail workers were laid off in 2020, and a significant number did not return to the industry. As of 2023–2024, unemployment has been low and other sectors (like warehousing or gig jobs) compete for the same workers, so retail managers have struggled to hire enough employees. At one point in 2021, nearly 700,000 retail workers quit in a single month, reflecting dissatisfaction with low pay and tough conditions. To attract and retain staff, companies have had to raise wages. In fact, average pay in the retail sector rose about 14% from 2020 to 2023, thanks to minimum wage hikes and competitive pressures. While better pay is good for workers, it means higher labor costs for store owners. Many chains have seen their payroll expenses jump significantly, cutting into already thin profit margins. For marginally performing stores, these added costs can flip them into unprofitability – prompting closures.

On top of wages, the pandemic and its aftermath brought other staffing headaches: shortages leading to overworked remaining employees (risking burnout), and occasionally reduced store hours or service quality that then drive customers away in a vicious cycle. Some retailers also invested more in training or in hiring security personnel (due to rising theft, discussed shortly), adding further expense.

Occupancy costs, primarily rent and real estate overhead, are another big piece of the puzzle. Physical stores must generate enough sales per square foot to cover their rent, but many are no longer meeting that bar. Retail leases often include annual rent escalations, and in desirable locations rents were high to begin with. As sales decline, rent eats up a larger share of revenue, making some stores uneconomical. Rite Aid, for instance, noted it had been “significantly burdened by its suboptimal lease portfolio” – a polite way of saying it had too many stores in costly locations where sales couldn’t keep up with rent and operating costs. Numerous chains in bankruptcy (from grocers to specialty shops) have tried to get out of expensive leases as a way to cut losses. When leases come up for renewal, retailers now often opt not to renew if the store’s performance doesn’t justify the cost – leading to additional closures of “underperforming” stores. Even a healthier company like Macy’s has followed this playbook: Macy’s announced in early 2025 that it would close 66 stores that it deemed “underproductive” so it could focus resources on its better-performing locations. This is a form of proactive retreat to manage cost pressures.

A more troubling operational issue contributing to some closures is the rise in inventory shrinkage (shrink), which is the loss of inventory due to theft, fraud, damage, or administrative error. Retailers nationwide have reported increases in theft, including organized retail crime rings that steal large quantities of merchandise. According to the National Retail Federation, inventory shrink hit a record $112 billion in losses in 2022, up sharply from about $94 billion in 2021. While not all shrink is theft, a significant portion is attributed to shoplifting and organized theft. This trend affects the bottom line like an added cost – products walk out the door with no revenue, effectively a hit to profit. In some urban areas, brazen shoplifting and safety concerns have reached a point where stores are closing for that reason alone. For example, in San Francisco, along with the foot traffic issues, retailers cited “unsafe conditions for customers and employees” – a reference to crime and disorder – as a factor in decisions to leave downtown. Chains like Walgreens have closed several stores in San Francisco and other cities where high theft and security costs made them unprofitable to operate. Target and others have publicly warned about rising theft eroding their margins, even implementing measures like locking up everyday items on shelves. All of this adds friction and expense to running stores, and if the cost of security measures and lost goods becomes too high, some retailers choose to shut certain locations. While theft isn’t the primary driver of the nationwide store closure wave, it’s one more pressure point hastening closures in specific areas.

In summary, the operational costs of running physical stores have climbed at the same time that sales have been under pressure. Many retailers are effectively making less money per store and spending more to keep them open, a recipe that often ends in tough cuts. Closing stores – especially lagging ones – is a way companies are trying to rebalance and survive in this new reality.

Empty Storefronts: Rising Vacancies in Commercial Real Estate

All of these store closures have a visible side effect: empty storefronts and rising retail vacancies in many communities. The commercial real estate market is feeling the impact of the retail retrenchment, as landlords grapple with dark stores and malls search for new tenants.

Shopping malls are a prime example. America’s malls have been in decline for over a decade, and the recent meltdown accelerated that trend. By the end of 2024, the vacancy rate in U.S. malls hit 8.7% – meaning roughly 1 in 12 mall storefronts was unoccupied. This is significantly higher than the vacancy rate for retail real estate as a whole (malls have more than double the vacancies of other retail formats). We’ve also seen high-profile mall anchor stores go dark: aside from Nordstrom in San Francisco, many malls lost Sears and JCPenney anchors in earlier years, and in 2024 some lost Macy’s locations as that chain continued to consolidate. Each major closure can leave hundreds of thousands of square feet empty. Projections indicate that by 2028 the number of large U.S. malls could drop to around 900, down from about 1,200 in 2022, as struggling malls either reinvent themselves or shut down entirely. In fact, analysts have warned that as many as 87% of large malls may close over the next decade if current trends persist – a startling potential culling of excess retail space.

Outside of malls, vacancy trends are a bit more mixed. Ironically, even as so many stores closed in 2024, the overall retail real estate market in some areas remained relatively tight. This is because certain types of retailers are expanding or new businesses are taking up space. For instance, discount grocery chains, dollar stores, auto parts stores, and other service-based retailers have been growing and often move into vacated spaces. In 2024, retail occupancy rates in strip malls and shopping centers actually reached their highest level since 2019 in some regions, thanks to demand from these expanding tenants (and limited new retail construction). However, this tends to be true for high-demand locations. In less prime areas, empty big-box stores and vacant downtown shops can linger without replacement. One report noted that when a mall does close, it typically sits empty for an average of nearly four years, and often requires repurposing (into offices, apartments, warehouses, etc.) rather than finding new retail tenants immediately.

The wave of closures in 2024–2025 is expected to free up roughly 140 million square feet of retail space nationwide in the near term. This could somewhat ease the shortage of space for retailers that are looking to expand into new markets. But it also poses a huge challenge: how to fill or reuse all that vacant space. Communities are left with ghost vacancies – from empty corner drugstores to hollowed-out mall wings – which can blight neighborhoods and reduce foot traffic for the remaining businesses. Some cities are confronting “pharmacy deserts” after drugstore chains closed numerous locations, meaning residents have to travel much farther for prescriptions. Likewise, rural areas where Walmart or another big store closed might have no easy retail options left, impacting local employment and convenience.

In essence, the commercial real estate landscape is adjusting to a new equilibrium. Landlords are increasingly turning to creative solutions, such as repurposing dead retail spaces into gyms, medical offices, entertainment venues, or fulfillment centers. We’re seeing malls add non-retail attractions (like casinos, schools, or residential units) to backfill empty space. While retail vacancy at a national level isn’t at an all-time high (thanks to relocations and new entrants), the distribution of space is shifting – we have an oversupply of outdated retail space in some locations and continued demand for modern retail space in thriving areas. The shakeout of 2024–2025 is effectively accelerating the “right-sizing” of U.S. retail real estate. Unfortunately, in the short term it means a lot of “For Lease” signs and darkened windows where familiar stores once stood.

Conclusion: Retail’s New Reality

The torrent of store closures across America in 2024 and 2025 reflects a retail sector in the midst of profound transformation. Multiple converging forces – economic stress, technological shifts, and changing lifestyles – have fundamentally altered what it takes for a retail store to survive. Many legacy retailers that were too slow to adapt (or too financially strained to weather storms) have paid the price, either shrinking dramatically or disappearing entirely. The closures are painful for employees who lose jobs and for communities that lose a local store, but in many cases they were the culmination of trends long in the making.

It’s important to note that retail is not “dead” – Americans are still shopping, spending over $7 trillion annually on retail goods. In fact, overall retail sales even grew slightly in 2024, albeit at a modest 2–3% rate that mostly just kept pace with inflation. But how and where people shop is radically different than a decade ago, and the retail industry is recalibrating around that new reality. Going forward, we can expect retailers to operate fewer physical stores and invest more in their online presence and delivery logistics. The stores that do thrive will likely offer things e-commerce can’t – whether it’s an immersive experience, personalized customer service, or immediate convenience. We’re already seeing successful examples like pop-up shops, small-format “neighborhood” stores, and hybrid models where a store doubles as a local fulfillment center for online orders.

For the vast number of empty stores left in the wake of the meltdown, recovery will take creativity and time. Some empty big boxes will find second lives as gyms, churches, offices, or community centers. Malls will continue to reinvent themselves with mixed-use developments. In the meantime, consumers may have to adjust to driving a bit farther for certain errands or switching to online options if their local store closed.

In sum, the retail landscape in America is undergoing a shakeout and reinvention. The recent wave of closures – fueled by inflation, interest rates, e-commerce competition, changing consumer habits, and rising costs – is a difficult but perhaps necessary purge of overextended businesses and outdated formats. What emerges will be a leaner retail sector that is more in tune with today’s consumer preferences. Shoppers will still visit brick-and-mortar stores, but likely fewer of them, and for different reasons than in the past. The “retail apocalypse” narrative may be exaggerated, but there’s no doubt that we are witnessing the end of one retail era and the beginning of another. The ability of retailers to adapt to this new era will determine how many more store closures lie ahead. For now, the retail meltdown serves as a case study in how swiftly and significantly an industry must evolve to survive in changing times.