Retail Small Businesses Are Closing Across the Country; the Survivors Have One Thing in Common

Last month, S&P Global Intelligence reported a “historic surge” in bankruptcies, with businesses closing at the fastest pace since 2020. Few were affected by this surge more than retail small businesses. While American consumers will eventually move on to new favored establishments, that isn’t an option for local store owners, many of whom skipped holidays, birthdays, and family milestones to keep their entrepreneurial dreams alive.

In addition to powering 66 percent of the employment growth in the U.S. and 44 percent of the U.S. GDP, small businesses comprise more than 98 percent of all retail companies. Research by the Harris Poll in 2023 found that nearly nine in 10 Americans agree there would be a huge gap in their community without retail small businesses, yet when these businesses fail or fall on hard times, they alone deal with the mental and financial fallout. Earlier this year, as business optimism around future conditions hit its worst levels in almost 50 years, nearly half (47 percent) of small business owners noted the U.S. economy has severely impacted their mental health.

Retail small businesses need a solid plan of action as we head into the busiest time of year for the industry. Only through strategic planning for the future will they weather the impending economic storm and continue to operate in their communities for years to come.

Planning Strategically for the Future

As signs of an economic downturn begin to multiply, businesses must remain agile and adaptable to the varying changes in the economy. Flexibility is the key to small retailers outmaneuvering big-box stores, which can struggle to pivot on account of their size during periods of rapid economic change. Unlike these businesses, a smaller workforce allows retailers to adjust operations, explore new niche product lines, or offer personalized services that can better resonate with consumers' evolving preferences.

By remaining responsive to market dynamics, these businesses can not only survive but have a greater chance at thriving in challenging economic climates. In order to leverage these inherent strengths, however, they will need a strong plan of attack.

The Blueprint for Retail Small Business Success

Retail small businesses must be willing to take several crucial steps to navigate uncertainty and ensure long-term success:

• Continually assess and adapt to market conditions. This involves closely monitoring consumer behaviors, identifying emerging trends, and adjusting business strategies accordingly. Flexibility in product offerings, floor layout, and discount pricing can help businesses remain relevant and responsive to changing customer needs.
• Explore downsizing operations to optimize efficiency and reduce cost. This could mean streamlining workforce size or consolidating locations if spread too thin. By rightsizing their operation, retail small businesses can better withstand financial pressures and maintain stability during economic downturns.
• Manage credit effectively and protect profit margins. Businesses should review credit policies, tighten credit terms where feasible, and closely monitor cash flow. They should also look to prioritize healthy profit margins by negotiating more favorable contracts with suppliers and exploring ways to diversify revenue (whether that means opening an online storefront or subleasing that unused back room to an up-and-coming business).

To turbocharge further growth and safeguard the small business retail owners driving America’s economic growth, it's crucial that a robust plan to weather the impending economic storm is adopted so that these businesses may continue to serve their communities for years to come.

Petr Marek is the founder and CEO of Invoice Home, an invoice generating platform designed for small businesses, freelancers and entrepreneurs.