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What is causing the latest wave of retail bankruptcies?

On Behalf of | Mar 27, 2023 | BANKRUPTCY LAW - Business & Commercial Bankruptcy

The last few years have not been kind to brick-and-mortar retailers in Maryland and around the country. Traditional retailing has been struggling to cope with the growing popularity of online shopping for more than a decade, and a wave of high-profile business bankruptcies suggest that e-commerce is winning the battle. Things got far more difficult for the retail sector in 2020 when lockdowns and travel restrictions emptied stores and brought sales to a virtual halt, and many chains were not able to recover from this setback.

Consumers are tightening their belts

Retailers hoping for a return to normalcy have been dealt several blows. Supply chain problems prevented them from stocking up on inventory when shoppers finally did return to stores, and then consumers tightened their belts in response to rising interest rates and soaring inflation. Brick-and-mortar retailers must now compete with online marketplaces for consumers who are shopping less and buying fewer items when they do shop.

A slowing retail sector puts the economy at risk

When some of the country’s most famous retail chains file for business bankruptcy, it puts the entire economy at risk. Almost 10 million Americans work in retail, and another 40 million jobs rely on it. Brick-and-mortar stores currently account for 87% of retail sales in the United States, but that figure is expected to drop to 72% by the end of 2024.

Things may get worse before they get better

Retail is an industry in transition, and stores and chains that are not able to adapt to new market conditions face a grim future. Companies like Walmart that have built successful online operations to complement their brick-and-mortar businesses will likely thrive in the years ahead, but retailers that cling to a bygone way of selling products will find it difficult to survive.