The U.S. retail sector is facing a challenging period, with store closures reaching their highest levels since the pandemic. In 2024, 7,325 major retail locations closed, marking the most significant number of closures since 2020.
This trend is projected to worsen in 2025, with an estimated 15,000 retail locations expected to close, nearly doubling the previous year’s figures.
This surge in closures is attributed to several factors, including inflation, changing consumer preferences, and intense competition from online retailers like Shein and Temu.
The Rise of Shein and Temu
The rise of the Chinese e-commerce platforms Shein and Temu is a major cause of the wave of retail closures. These companies have attracted huge followings by selling products at rock-bottom prices, which has enabled them to upend leading U.S. competitors.
Coresight Research views Shein and Temu as a combined $100 billion-plus force that is bearing down on established retailers in markets around the world, including the U.S.
Their business model, characterized by agile supply chains and direct-to-customer shipping, allows them to offer prices that American companies find difficult to match.
Economic Pressures and Changing Consumer Behavior
Inflation has played a crucial role in shaping consumer behavior, forcing shoppers to hunt for the cheapest deals possible.
This trend has had a devastating effect on brick-and-mortar retailers, many of whom have struggled to adapt their supply chains and implement cost-cutting technologies.
According to Deborah Weinswig, CEO of Coresight Research, consumers are not only looking for the best prices but also prioritize convenience and efficient shopping experiences, shying away from disorganized or understocked stores.
Retailers Struggling to Compete
Many U.S. retailers have failed to adequately recognize the threat posed by Shein and Temu, and consequently, have not adjusted their supply chains and pricing models effectively.
Though some retailers, such as Walmart and Amazon, offer benefits such as faster delivery and a wider product range, they often can not compete on price alone with the likes of Shein and Temu.
The intense focus on price by consumers means that loyalty to traditional brands is diminishing, as shoppers are willing to switch platforms to secure the lowest possible cost.
Key Players Impacted by Closures
Several major retailers experienced significant store closures in 2024, including Family Dollar (718 closures), CVS Health (586 closures), and Conn’s (553 closures).
Looking into 2025, companies like Party City (738 closures), Big Lots (601 closures), and Walgreens Boots Alliance (333 closures) are projected to close a substantial number of their locations.
These closures highlight the broad impact of current market conditions across various retail segments, from discount stores to pharmacy chains.
The “Gamification” of Shopping
Shein and Temu have also leveraged sophisticated digital strategies to attract and retain customers. Their apps often use tactics such as constant notifications, product recommendation algorithms, and prominently displaying discounts through promotions and flash sales.
Anand Kumar, associate director of research for Coresight Research, explains that the “gamification strategy,” which includes mini-games that offer coupons and mystery boxes, effectively taps into customer psychology by creating excitement around getting a good deal.
Supply-Chain Advantage and Marketing Prowess
A core element of Shein and Temu’s success lies in their highly agile supply chains. Shein, for example, employs a small-batch production method, launching new styles in limited quantities (100-200 items) to test demand and scale efficiently.
This direct manufacturing and shipping model from China allows them to be agile and cost-effective, directly competing with American companies that historically manufactured goods in China but shipped them through intermediaries. Both companies have also excelled in marketing, particularly through livestreaming and social media.
The Tariff Landscape and Future Outlook
While Shein and Temu have faced challenges, including the potential closure of trade loopholes and increased tariffs from the U.S., experts suggest they are unlikely to be counted out.
Tariffs, even if significant, can sometimes be partially passed through to consumers, and these companies’ ability to source goods cheaply from China means they can often maintain a price advantage over competitors.
Despite a temporary pause in direct-to-consumer shipments from China due to tariff concerns, Temu has resumed this strategy, aiming to retain its competitive edge.
A Shifting Retail Landscape
A combination of the inflationary pressures, evolving consumer behaviors, and the aggressive expansion of online platforms like Shein and Temu is reshaping the U.S. retail landscape.
While store closures are rising, 2024 also saw 5,970 new store openings, resulting in a net loss of 1,355 locations. However, for 2025, store openings are expected to decrease to around 5,800, leading to a projected net loss of approximately 9,200 retail locations.
This indicates a continued contraction of physical retail footprints as online sales, particularly from e-commerce players and social commerce channels like TikTok, continue their rapid growth.