The dipping consumer demand owing to persistently high inflation is whittling away at the US Retail sales expectations this year. In the latest torpedo in the retail landscape of San Francisco, luxury retail chain Nordstrom has clinched to shutter two stores near downtown SF. Nordstrom’s store closures reflect the challenges haunting businesses in larger cities as they face rising operation costs, crime concerns and subjacent footfalls from pre-pandemic levels.
In US downtowns, while foot traffic rose above the previous year, it was still 25 percent lower than 2019 levels. The retail industry in the United States is dynamic and ever-changing, driven by a wide range of factors like technology, consumer trends, global events, and economic conditions. Public safety and worsening crime perceptions sway the locations where retailers want to put shop.
As consumer spending accounts for nearly 70 percent of the US GDP, this year’s retail sales will determine whether the United States ends the impending doom and forays into the much-feared recession. Post-lockdown retail sales spiked owing to strong demand and even healthier household balance sheets. But 2023’s tightening consumers have influenced the declining sales since November-December 2022, as people spent less and saved more.
“If the consumer is pulling their horns, it is going to contribute to slower economic growth and perhaps, recessionary growth, to a significant degree.”
Retail companies like Amazon and Walgreens Boots Alliance reported Q4 profits below the belt. Weekend foot traffic is burning slow – 29 percent fewer consumers are visiting US downtowns than in 2019.
Nordstrom Store Closures: San Francisco Retail Market News
Amidst San Francisco’s department store closures, Nordstrom’s closure in downtown SF had indented the exodus of office and retail tenants in the city which is rampant with crime, economic slowdown, and the slowest return-to-office. Other large retailers which are slated to, or already have closed down their brick-and-mortar stores in urban areas include H&M, Whole Foods Market, Walmart, Abercrombie & Fitch, and Gap.
The acute problems affecting consumers and business owners alike are wedging a proverbial gap in spending plans. The decline in office workers is also affecting downtown retail. The government is pushing businesses to reinstate mandates regarding office attendance to increase the potential of tax receipts and commerce. Urban retail availability superseded suburban availability in the latter half of 2022, for the first time since Q1 of 2013.
“Downtown America is particularly hit hard by the combination of higher interest rates and working from home.”
With the steep declining retail sales in San Francisco that others in California, in an attempt to cope with the shortfall and other risks, Mayor London Breed has instructed city department heads to gear up for cuts of up to 13 percent over the next two years.
Nordstrom In Downtown SF: Departmental Store Closures
The luxury departmental chain has quipped to close its Nordstrom Rack store on Market Street, SF on July 1 and its store at the Westfield San Francisco Centre Mall by the end of August. This Nordstrom’s San Francisco had been operative for the last 35 years, but the swiveling foot traffic due to changing market conditions factored in the closures.
“We can better serve our customers by focusing on nearby 16 Nordstrom and Nordstrom Rack locations, as well as online.”
Nordstrom’s retail store closures have been well-thought-out plans based on the operating landscape, with peers like Macy’s also closing down a number of locations in urban areas. Thinning the count of the larger departmental stores, Nordstrom Rack’s presence has been buoying up – selling items from main stores at a discounted price. Before announcing Nordstrom’s closures in Canada in March, the Seattle-based chain operated 94 departmental stores in the US.
Plausible Reasons For San Francisco’s Nordstrom Store Closure
The mayor’s office has been having ongoing conversations with the shopping mall’s owner for beefing up security due to rampant criminal activity surrounding the Market Street neighborhood. The mall’s owner Unibail-Rodamco-Westfield had been engaging with city leaders for expressing concerns about safety.
“A growing number of businesses and retailers are leaving the area due to unsafe conditions like robberies, motor vehicle thefts and larceny thefts, which have increased since 2022.”
While the city has cracked down on ramping up efforts for developing the area around Westfield, the status quo is unsatisfactory and needs more to be done. Large retailers have been vociferous regarding problems like an increase in shoplifting. Home Depot and Best Buy have had to step up on locking away items on the store shelves and keeping a close eye on high-risk goods.
On a parting note, retail business rebounded surprisingly well from the pandemic, but the weakness remained in urban downtowns where businesses relied on workers to commute five days a week. Retailers have now shifted their expansion focus to the suburbs.
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