Why is Walmarts closing stores in the biggest cities? The country’s largest retailer had warned earlier this year that it would be a tough year ahead for them. They are closing 23 locations, saying these branches had poor financial performance losing millions of dollars. Walmart had been closing a few stores the past few years, saying that these were underperforming although they did not give specifics.
Why are Walmart stores closing in big cities across the US?
Below-par numbers are certainly a solid reason for closing up shop, but there are underlying factors that could be blamed for poorer sales.
A glut of stores
Some store owners came out of the pandemic strong, taking advantage of the fact that shoppers were ready to buy things in-store again. According to The Wall Street Journal, retail vacancy went down last year, while asking rents for shopping centers went up. The opening of these bricks-and-mortar shops provided competition for the retail giants, and the market became overcrowded.
Work from home
More people are working from home compared to before the pandemic, and this means there are fewer people in city centers. The increase in people engaged in remote work has hurt shopping areas in big cities, which used to be filled with office employees who were commuting to and from work. According to studies by JP Morgan Chase, because of this shift of workers from urban centers to the suburbs, retail establishments have mirrored the movement, having to close locations in expensive cities to move to cheaper ones.
Online shopping
Shopping online had been on the rise for years, but the pandemic fueled a spurt in its growth. Online sales have become more attractive to retailers as they avoid losses due to theft and human error.
Salary increase
At the start of the year, Walmart announced that they would be raising their minimum wage from $12 to $14 an hour as they tried to retain their existing personnel. The company is trying to keep pace with its competitors in a tight labor market for lower-wage businesses. This increase in salaries is likely to have had an impact on the retailer’s profit margins.