Mid-tier retailers are at risk: Despite the stiff economic headwinds, we expect personal luxury sales will grow by a healthy 13.3% this year thanks to a core consumer base that has been less affected by inflation. At the same time, value-oriented retailers have benefited from consumers trading down from more expensive alternatives. That’s left mid-tier retailers feeling the brunt of the challenging economic climate.
- Many of those mid-tier retailers have stores located in malls, which have seen foot traffic decline even as shoppers returned to in-person shopping.
- On Black Friday foot traffic was down 2.3% year-over-year (YoY) at indoor malls, 3.9% at outlet malls, and 0.5% at open-air lifestyle centers, per Placer.ai. That’s particularly notable given that many consumers were avoiding in-person shopping in 2021 due to rising COVID-19 cases and several retailers were shifting focus away from the sales holiday to ensure they had adequate inventory levels.
- The declines are even more pronounced when compared with 2019. Indoor mall foot traffic was down 14.2% compared with the last pre-pandemic holiday season, while outlet malls declined 17.8%, and open-air lifestyle centers dipped 11.7%.
- Those shifting patterns are why retailers are aggressively seeking to “rightsize” their store counts. Macy’s, for example, is closing about 125 Macy’s stores and expanding its smaller format, off-mall stores.
The big takeaway: Retailers with a strong brand and clear positioning should be fine even if the US falls into a recession. However, shoppers have far less reason to visit retailers that lack a distinct identity, particularly if they can find the same, or similar, products elsewhere.
- As a result, those undifferentiated retailers will likely close stores as they struggle to survive.
This article originally appeared in Insider Intelligence's Retail & Ecommerce Briefing—a daily recap of top stories reshaping the retail industry. Subscribe to have more hard-hitting takeaways delivered to your inbox daily.