America’s Retail Store Closings Approach 5,000 This Year.

downsizing business

While there are growing concerns about record inflation, rising borrowing costs, the psychological impact of Russia’s invasion of Ukraine and a recent surge in gasoline prices, U.S. consumers continue to be very resilient, buoyed by broad-based labor-market strength, solid wage gains and accumulated savings during the pandemic. Closeouts continue to drive off price sales and excess inventory and overstock products are in big demand. Any companies wanting to liquidate old inventory or liquidate overstock are sitting pretty. Companies that buy liquidations specialize in buying overstock from people shutting down business, closing 3PL warehouses, moving warehouses where they must sell the entire inventory, or just liquidating old inventory.

The resilience of the consumer is well reflected in retail sales, which rose about 7 percent year-over-year in total in March and 4 percent when stripping out sales at gas stations, auto dealers and restaurants. While inflation (higher retail prices) contributed to the year-over-year growth, the increase came on top of a surge in sales in March 2021 as consumers received their stimulus checks under the American Rescue Plan. Consumers are looking for deals on closeouts, overstock inventory, excess inventory and they want to buy overstock if they are shutting down business, going out of business and have closeout merchandise or if they can find deals from closeout brokers. They often shop on closeout websites specifically looking to liquidate old inventory for pennies on the dollar or even buying customer returns and dead stock at deep discounts.

Also noteworthy, physical stores did better in March than online retailers for the first time since the pandemic started in the spring of 2020 as consumers return to more normal shopping patterns. Closeout merchandise has made it’s way into mainstream retail selling in dollar stores, bin stores and general discounters. Today’s consumer wants warehouse sale goods and want to get in on deals when companies either liquidate old inventory, get rid of closeouts, Closeout buyers specialize in liquidating inventory at discounted prices, and then reselling this excess inventory into the secondary discount store market.

Not only are conventional retail stores shutting down business. In addition to general merchandise retail stores shutting down and liquidating inventory there are others. FedEx (FDX) said it will be closing over 90 stores and at least five corporate office locations as it looks to shore up its costs amid what it called a "continued volatile operating environment." The package delivery company is looking to cut expenses as it saw its delivery volume shrink in the last quarter and expects the global economy to get worse going forward. FedEx also said it was freezing hiring and reducing its flight frequency. The company will also reduce workforce hours and cut back on Sundays hours at some FedEx Ground locations. Following the announcement from FedEx, its share price dipped over 20% in premarket trading on Friday. In a statement, FedEx president and CEO Raj Subramaniam said: "Global volumes declined as macroeconomic trends significantly worsened later in the quarter, both internationally and in the U.S. We are swiftly addressing these headwinds, but given the speed at which conditions shifted, first quarter results are below our expectations. In this type of economic climate, companies will be forced to liquidate excess inventory to closeout buyers and buyers of obsolete merchandise. Liquidation buyers specialize in taking dead stock or slow moving inventory from importers, distributors and wholesalers. The conventional wholesale liquidator will buy closeout toys, closeouts of housewares, home décor and lawn and garden. They may also work with Amazon FBA sellers shutting down, people shutting down business, importers that want to liquidate old inventory and dead stock not selling.

Some popular chains shuttering stores include CVS, Bed Bath and Beyond, Nordstroms, Rite Aid, Sears and many more. The retail environment is a challenge as the cost of living is going up and disposable income is going down. The only segment of the market doing well is closeout, overstock and discount sellers. If you sell dead stock, liquidate Amazon inventory or offer some other deep discount deals you can still do well in this climate. It is important to get rid of old inventory taking up valuable warehouse space because it will just sit and collect dust. Consumers today will be happy to buy closeouts if they are cheap enough and still good merchandise.

UBS is predicting 40,000 to 50,000 retail stores will close in the U.S. over the next 5 years. A pandemic shakeup in 2020 led to a surge in store closures, coupled with dozens retailers filing for bankruptcy, which emptied out shopping malls and left vacancies scattered along the streets major markets including New York City. Closeout brokers and buyers of overstock inventory were very busy cleaning up all the surplus inventory and canceled orders from major chains. Some closeout distributors specialize in buying only closeouts of housewares, while other surplus buyers handle all categories.

The aftermath, though, was a temporary relief from closures, as companies took the chance in 2020 to quickly slim down their store counts when consumers were holed up at home. In fact, in 2021, retailers reported net store openings, marking a sudden reversal from years of net declines. Companies seized the opportunity to take advantage of cheap rents and an eagerness among Americans to get out and shop for closeouts, inventory liquidations, Amazon FBA liquidations, and warehouse closures.

Brick-and-mortar shops have proven to serve a critical role for retailers’ businesses during the Covid pandemic, the bank said in a new report on Wednesday, and retail sales growth has remained strong, in part due to rising inflation. This all bodes well for the future of physical stores, according to UBS and they will do well if catering to closeout buyers with liquidations for inventory and closeout merchandise.

UBS is now projecting between 40,000 to 50,000 retail stores in the United States closing over the next five years, down from the 80,000 closures it previously forecasted. That’s out of about 880,000 total retail stores that the firm tracks nationwide, excluding gas stations. UBS sees the most closures shaking out among clothing and accessories retailers, consumer electronics closeout businesses and home furnishing chains, or about 23,500 cumulatively within these categories by 2026.

Merchandise USA is a liquidation buyer for old inventory, dead stock, and obsolete inventory. If you have too much inventory sitting in the warehouse and need to make space we can help. Not all liquidation inventory companies are alike so call us to work with one of the biggest closeout buyers in the U.S.