As the retail industry enters 2025, it faces a bifurcated trajectory: some chains are gearing up for aggressive expansion, fueled by investments in omnichannel strategies and new formats, while others are contending with mounting financial challenges and an inability to pivot amid shifting market dynamics.
Key Drivers of Retail Expansion and Contraction
The shifting dynamics of the retail landscape in 2025 are shaped by a complex interplay of digital innovation, changing consumer behaviors, economic conditions, and real estate strategies. These factors determine which retailers are poised for growth and which are struggling to stay afloat.
Digital transformation remains a central driver of success in the industry. Retailers that have invested heavily in e-commerce platforms, seamless omnichannel experiences, and technologies like AI for inventory management and customer personalization are gaining a competitive edge.
Consumers increasingly expect a hybrid shopping experience where the lines between online and offline are blurred. Those retailers that fail to embrace these digital advancements are finding themselves outpaced by more agile competitors.
Consumer preferences continue to evolve, with shoppers demanding greater convenience, sustainability, and tailored experiences.
The rise of compact urban store formats, like those championed by Target, reflects a growing need for easily accessible shopping options in densely populated areas.
Simultaneously, there is an increasing emphasis on ethical business practices, with consumers favoring retailers that adopt sustainability measures, such as energy-efficient store designs and environmentally friendly product lines.
Economic challenges, including inflation and supply chain disruptions, have created significant pressure on retailers across the board. Rising costs for raw materials, labor, and transportation are forcing companies to reevaluate their pricing strategies and operational efficiencies.
For value-focused retailers like Dollar General and Aldi, these conditions have provided an opportunity to attract price-sensitive consumers, while others, such as Bed Bath & Beyond and Walgreens, have struggled to maintain profitability.
Real estate strategies are also playing a critical role in shaping retail success.
As urbanization trends accelerate, retailers are experimenting with smaller, more flexible store formats that can cater to specific community needs.
Conversely, legacy chains with larger, outdated store footprints often find themselves burdened by high operating costs and underperforming locations. The ability to adapt to new spatial and consumer dynamics is proving to be a key differentiator between growth and decline.
These interconnected drivers underscore the complexities of navigating the modern retail landscape.
Walmart: Reinventing the Supercenter
Walmart, the nation's largest retailer, is embarking on a significant expansion over the next five years, adding over 150 larger-format stores designed to cater to evolving customer preferences.
These new locations will feature improved layouts, more self-checkout lanes, expanded pickup and delivery options, and an increased focus on health and wellness.
The initiative aligns with Walmart's commitment to blending physical retail with digital commerce, ensuring it remains competitive in an Amazon-dominated market.
Additionally, Walmart is doubling down on integrating technology into its store operations. Through investments in AI-powered inventory management and cashierless checkout systems, the retailer is enhancing operational efficiency while maintaining its low-price leadership.
Walmart’s move reflects a broader trend among major retailers to modernize their physical footprints while embracing digital transformation.
Target: Compact Stores and Urban Outreach
Target’s ambitious plan to open 300 new stores over the next decade focuses on small-format locations in urban neighborhoods, college campuses, and densely populated areas.
These compact stores, typically one-third the size of a traditional Target, are tailored to meet the needs of urban shoppers who prioritize convenience and curated assortments.
Target’s emphasis on sustainability also plays a critical role in its expansion strategy. New stores will incorporate energy-efficient designs, with solar panels and electric vehicle charging stations.
This aligns with the retailer's broader ESG goals, which resonate with its younger, environmentally conscious customer base.
Dollar General: Building on Bargain Demand
Dollar General, a mainstay in rural America, is capitalizing on its core customer base by planning over 1,000 new store openings in 2025.
The retailer's focus on low-cost essentials, combined with its ability to operate in underserved areas, has made it a retail powerhouse.
The chain is also experimenting with DG Fresh, its self-distribution model for perishable goods, and introducing fresh produce in select stores—a strategy aimed at increasing customer traffic.
Costco: Expansion Meets Exclusivity
Costco is poised to open over 15 new warehouse clubs in 2025, with a focus on the southern and midwestern U.S. markets. Known for its membership-based model, Costco's expansion strategy is centered on enhancing its private-label Kirkland Signature offerings and bolstering its online presence.
By investing in e-commerce fulfillment centers and improving delivery logistics, Costco is ensuring its growth extends beyond physical stores.
7-Eleven: The Convenience King
7-Eleven is aggressively expanding its footprint, with plans to open 125 new "food-forward" stores in 2025. These stores will prioritize fresh and ready-to-eat meal options, reflecting changing consumer preferences for convenience and quality.
The chain’s investment in delivery services through partnerships with apps like DoorDash and Grubhub underscores its commitment to catering to busy, on-the-go customers.
Not all major chains are projecting rosy outlooks for 2025. Several well-known names are fighting headwinds entering the new year.
Walgreens: The Pharmacy Giant in Retreat
Despite being a cornerstone of American retail, Walgreens is struggling to adapt to changing consumer habits and economic pressures. The chain plans to close 1,200 stores over the next three years, citing inflationary pressures and declining foot traffic.
With consumers increasingly turning to online pharmacies and telehealth solutions, Walgreens faces a critical need to revamp its business model. Its focus on healthcare services, such as in-store clinics and partnerships with primary care providers, is a step in the right direction, but execution will be key.
The Container Store: Struggling Amid Housing Market Woes
The Container Store’s fortunes are closely tied to the housing market, which has experienced significant volatility in recent years. The retailer is reportedly on the verge of bankruptcy, with declining sales and mounting debt.
Efforts to diversify its product offerings and launch new marketing campaigns have failed to reverse its downward trajectory. Without a clear path to financial stability, the retailer risks joining the growing list of pandemic-era casualties.
Forever 21: Fashion for a Fading Era
Forever 21, a once-dominant fast-fashion retailer, continues to grapple with the aftermath of its 2019 bankruptcy. While it has closed numerous underperforming locations, including a prominent store in Santa Cruz, California, the chain is struggling to redefine its brand in a crowded and competitive market.
Efforts to revitalize its online presence and collaborate with influencers have seen mixed results, leaving the future of the retailer uncertain.
Bed Bath & Beyond: A Legacy on Life Support
Although it avoided complete liquidation in 2023 through a last-minute acquisition deal, Bed Bath & Beyond remains in a precarious position.
The retailer has significantly scaled back its physical presence, focusing instead on a digital-first strategy. However, its inability to compete effectively with Amazon and Walmart in home goods continues to hinder its recovery efforts.
Save A Lot: Closing Locations Amid Financial Pressures
Discount grocer Save A Lot has been forced to close over 40 stores in the past two years, including a long-standing location in Cedar Rapids, Iowa.
While the chain has plans to expand its network to 3,000 stores, ongoing financial challenges and increased competition from Aldi and Lidl make this goal appear ambitious.
The ability to innovate, adapt to consumer expectations, and remain resilient in the face of economic pressures will ultimately separate the winners from the losers in the coming year.
