Major chains like Nordstrom, Walmart, Whole Foods, Starbucks, and CVS have recently closed stores in major cities across the US, raising concerns about the future of retail in prominent downtowns and business districts. Several factors are pushing chains out of city centers, including a glut of stores, online shopping, high rents, crime and safety concerns, and difficulty hiring workers. To reinvent downtown retail, drastic changes may be required.
One possible solution is to create denser neighborhoods with a broader mix of affordable housing, experiential retail, restaurants, entertainment, parks, and other amenities. However, this won’t happen overnight. “Once these cities become true urban neighborhoods, then you will find retailing start to come back in different ways and forms,” said Terry Shook, a founding partner at consulting firm Shook Kelly. How policymakers remake their downtowns – with retail as a crucial attraction – will be crucial to cities’ fiscal health and regional economies.
While policymakers have pointed to crime as a chief reason for store closures, citing videos of brazen shoplifting incidents, the impact of shoplifting may have been overstated in some cases. The closures aren’t solely due to crime rates – several trends have converged to put these stores at risk. Perhaps most significant is the glut of stores in America. From 1995 to 2021, more stores closed every year than opened, a trend dubbed the “retail apocalypse” by Morgan Stanley.
Remote work has also affected the shopping behavior of people living in major cities. Between 2019 and 2021, the number of people working from home tripled from around 9 million people to 27.6 million people, which reduced the number of people shopping downtown. Retailers responded to the shift by moving from more expensive cities like San Francisco and New York to cheaper Sun Belt cities like Phoenix and Houston. Online shopping also continues to pressure retail stores, which have seen a 53% increase in retail shrink since 2019, according to the National Retail Federation’s annual survey.
To address the exodus of retail chains from cities, policymakers need to rethink downtown design and focus on the vitality of the streets and the people who inhabit them. Streets can be blocked to cars on weekends and filled with street fairs, food festivals, live music, art exhibits, and other events to draw foot traffic downtown. Cities can also encourage landlords to offer more flexible leases to allow for pop-up stores and seasonal retailers. Additionally, zoning laws need to be updated to allow for the redevelopment of vacant office buildings and commercial real estate into affordable housing.
In conclusion, a vibrant downtown, filled with housing and street life, can deliver strong retail conditions. It is time policymakers rethink downtowns and find more innovative ways to attract retailers and visitors. Only then will we see a revival of retail in major US cities.