Three reasons behind department store closures – and what it means for your wallet

JCPenney department store closed and abandoned, sign removed.

Robert Gregory Griffeth /

In February, US department store chain Macy’s announced it would close 150 stores as it plans to shift its priority to marketing its luxury items. It plans to close its less successful stores and focus on better-performing stores, such as Bloomingdale’s.

However, Macy’s is not the only department store chain that is slowly disappearing. American retail giants Sears and JCPenney have also closed many stores in recent years. Major retailers like these were once a staple of American shopping centers, another concept that has declined in popularity.

There are several reasons behind these department store closures, and experts say the decline of these chains could have several impacts on your wallet.

Why department stores close

Department stores will continue to close through 2024. According to Corelight Research, total U.S. department store sales reached $103 billion in 2018 and are expected to decline to $81 billion by 2026. Experts believe that several reasons led to these department store closures.

Rental prices

Holly Habeck, CEO of equestrian clothing brand Thiandro Equestrian, said one of the biggest reasons for department store closures is the significant costs they pay, including lease payments to rent shopping centers or commercial spaces.

“The convergence of these expenses, coupled with consumers’ changing preferences for online shopping, has made the traditional retail model unsustainable,” Habeck said.

Online shopping

As Habeck stated, another major reason for the declining success of department stores is the increased popularity of online shopping. According to a 2022 survey from research firm Statista, 55% of U.S. consumers say the biggest reason they shop online is for delivery “straight to their door.” Statista also found that by early 2023, 43% of consumers in America say they would rather shop online than in person.

Ultimately, the convenience and lower prices that online shopping brings have drawn customers away from traditional retailers.

“This trend has been amplified by the COVID-19 pandemic, which has accelerated consumer behavior toward digital interfaces,” said Sarib Rehman, CEO of Flipcost, an e-commerce platform that sells cleaning, janitorial and office supplies.

Competition with major retailers

A third reason for the increased department store closures is the competition these stores face with major retailers such as Walmart, Target and online retail giant Amazon. Stores like these offer a greater variety of products than department stores, at lower prices, drawing shoppers away from department stores.

How department store closures affect your wallet

The closure of these stores will bring various advantages and disadvantages to consumers, communities and the economy.

More savings and convenience through online shopping

One reason online shopping attracts so many consumers is that it may cost less than shopping in person. A Flipcost study comparing online and in-store promotions of electronic goods found that online deals saved consumers an average of 15% more than in-store promotions offered by department store closures.

“Online platforms provide the ability to quickly compare prices from multiple suppliers, giving consumers the best available deal at their fingertips,” Rehman said.

Disadvantages of online shopping

While shopping online can save you money, fewer department stores result in a less practical approach to shopping. For example, when it comes to purchasing clothing, customers cannot feel the fabric or try on the item in person.

“The absence of physical interaction with products prior to purchase represents a potential disadvantage, leading to higher return rates and additional inconvenience for consumers,” Habeck said.

Impact on small businesses and communities

Rehman noted the impact department store closures could have on local communities.

“The closure of these stores has an impact on the local economy and employment, which can indirectly impact communities and the real purchasing power of consumers,” Rehman said.

Although many American consumers prefer to shop online, it will inevitably have an impact on both local and national communities, and it is always good to remember that we must support small businesses as our country sees a decline in the number of retail giants and shopping centers.

“It is critical to be aware of the implications of this shift,” Rehman said. “Supporting local stores where possible maintains economic diversity and employment within communities.”

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