In 2024, shifts in consumer behaviour have profoundly altered the retail and dining landscape across the United States, as shoppers became increasingly selective in their spending due to persistent inflation affecting housing and food prices. As of December 2024, Coresight Research recorded a stark increase in retail bankruptcies, with 48 filings compared to 25 in the previous year. Similarly, the restaurant industry faced significant challenges, with at least 22 chains filing for bankruptcy, marking the highest number of filings seen since 2020.
As consumers grappled with high costs, many well-off patrons opted to trade down to value-oriented retailers such as Walmart and Aldi. Fast food establishments and home cooking gained favour over traditional sit-down dining experiences, while department stores struggled to attract customers in an environment where online shopping and budget chains like H&M thrived. This trend also extended to the home goods sector, where purchases were limited, with consumers favouring affordable decorative items over substantial investments like furniture or major renovations.
Among the retailers finding success during this financially restrained environment was Walmart, which positioned itself as a go-to destination for groceries, comprising 60% of its total business. The retailer experienced an influx of customers from households earning upwards of $100,000, a demographic that executives are optimistic about retaining due to enhanced online services and a more fashionable clothing selection. Speaking to PBS NewsHour, a Walmart executive highlighted the company’s ability to attract higher-income shoppers, reminiscent of trends observed during the Great Recession over a decade ago.
Amazon similarly capitalised on the demand for value by launching its new low-cost storefront, Amazon Haul, offering a range of products priced under $20. Record sales during its Prime Day event in July underscored its continued appeal to deal-seeking customers, although potential tariffs on Chinese imports and domestic labour unrest could pose future challenges.
The fast casual dining sector also emerged as a winner, with chains such as Cava and Shake Shack performing well, driven by their emphasis on quality and value. Cava noted a revenue surge of over 33% in the first nine months of 2024, while Chipotle has taken measures to address consumer concerns about portion sizes.
Conversely, traditional retailers like Target faced significant hurdles. As a chain heavily reliant on discretionary spending, it struggled to maintain its customer base amidst perceptions of higher prices and a disorganised inventory. Meanwhile, Starbucks encountered difficulties due to increasingly complex orders leading to service delays, while new product launches failed to resonate with customers tired of premium pricing.
Legacy restaurants, long staples of the dining scene, also faltered in 2024, with chains such as Red Lobster, TGI Fridays, and Buca di Beppo filing for Chapter 11 bankruptcy as they contended with evolving dining patterns and heightened competition. Despite Red Lobster subsequently re-emerging under new ownership, the viability of older chains remains uncertain as they attempt to recover from years of declining sales.
Retailers that specialised in big-ticket items, such as Best Buy and Home Depot, experienced decreased sales as consumers reined in expenditures that had previously spiked during the pandemic era. Similarly, department stores continued to struggle, particularly those targeting middle-income shoppers, with Kohl's reporting its 11th consecutive quarter of sales declines. In a policy shift, Macy’s announced the closure of 150 locations over three years, while Nordstrom's acquisition by family members and a Mexican retail group in a bid for privacy may afford it greater flexibility in revitalising sales.
The retail and dining sectors of 2024 highlight a landscape in flux, where economic pressures have instigated shifts in consumer priorities and spending patterns, creating both opportunities and challenges for businesses throughout the market.
Source: Noah Wire Services