- Some retail stores will face a reckoning as pandemic spending wanes, consultant Steve Dennis said.
- Stores like Bed Bath & Beyond are an “unremarkable middle,” Dennis said on the Remarkable Retail podcast.
- Dollar General, T.J. Maxx, and other value-focused chains are likely to take their places in malls.
Expect more store closures and bankruptcies like what happened to Bed Bath & Beyond this year.
That’s a prediction from Steve Dennis, a retail consultant, former Sears executive, and co-host of the Remarkable Retail podcast with Michael LeBlanc.
For over a decade, stores like Sears, JCPenney, RadioShack, and others have closed or shuttered entirely due to competition from online rivals like Amazon and the decline of the middle class. Retail experts, journalists, and others have called the phenomenon the “Retail Apocalypse,” pointing to the empty storefronts that the closures have left behind, particularly at shopping malls.
The loss of middle-market retailers reflects the growing disparity between rich and poor in the US. The wealth gap between the wealthiest families in the US and the poorest more than doubled between 1989 and 2016, according to the Pew Research Center. Fewer middle-income consumers mean a shrinking shopper base for retailers that historically catered to the middle class, Retail Dive reported in 2019.
“The apocalyptic part is really about the collapse of the unremarkable middle,” Dennis said on the podcast. “It’s the poorly-positioned real estate, or the poorly-positioned retailers.” Consumers have lots of choices when deciding where to shop, from dollar stores to DTC brands, Dennis said. That’s left department stores and other retailers that once served broad swaths of the middle class in a tough place.
Some of those retailers got a reprieve from their troubles during the pandemic, Dennis said. Bed Bath & Beyond, for instance, benefited as consumers spent more time at home and bought kitchen appliances, furniture, and other goods.
But consumers have spent months shifting money toward food and consumables from discretionary purchases like clothing. That’s putting new pressure on the “unremarkable middle,” Dennis said.
“If you’re one of these retailers that’s stuck in the middle, à la Bed Bath & Beyond, Kohl’s, et cetera, your life is not getting any easier,” he said.
“Economic pressure is going to reveal more fragility on the part of many retailers,” Dennis added.
Many of the retailers likely to take their places are focused on giving consumers value for their money, NPR’s Marketplace reported in April. In the last few years, stores like David’s Bridal and Bed Bath & Beyond, which Marketplace called “the declining retail middle class,” have been replaced by Dollar General, Dollar Tree, T.J. Maxx, and Marshalls.
The decline of the retail middle class, and specifically stores like Bed Bath & Beyond, could be a gain for brands like Amazon, Target, and Walmart, as consumers search for value, Insider previously reported.
“The U.S. consumer has only so many dollars to spend, and if they’re gonna go spend it, they want to get as much bang for their buck as they can,” Naveen Jaggi, president of Americas at real estate services company JLL, told Marketplace.
At the same time, luxury retailers like Gucci and Hermes continue to attract affluent customers, who have continued to make big purchases even as inflation remains high.