First, specialized chain retailers had to compete with the rise of Amazon. Then, the woes of the Covid pandemic and the quasi-recession have weakened them further. Niche retailer Bed Bath & Beyond, widely known for home appliances, decor, and linens, will be closing 150 stores across the country as it struggles financially. Although most economists are not officially using the R-word (recession), America's economic situation has not improved as much as analysts hoped. Inflation has lessened, but only slightly. The drop in inflation has been due to lower gas prices, but these prices may rise again this autumn and winter as cooler weather has Europeans turning on the heat.
Slight Drop in Inflation Not Healing Retail Wounds
Until inflation drops enough for Americans to regain consumer confidence, retail will continue to struggle. While inflation may no longer be at its peak, it has a lasting effect. Many consumers may have burned through savings during the earlier months of inflation and are only now unable to maintain spending. Some may be reducing their spending on non-essential items now due to news that inflation is lingering and that many still fear an upcoming recession.
With consumers "battening down the hatches" in autumn 2022 due to economic fears, they will likely continue to shy away from niche retailers like Bed Bath & Beyond in favor of general retailers like Walmart and Target and the online giant Amazon. Those in the market for home wares may also look at big-box substitutes like Lowe's and Home Depot.
Demand for Home Wares Likely Down in Q4 2022
The housing market is cooling, and this will reduce demand for home wares sold by Bed Bath & Beyond. There is also likely falling demand for home wares due to most consumers having already purchased extensive home wares during the Covid pandemic. During the pandemic, when many Americans were at home more often, they completed any renovation and redecoration projects they had been planning. Now, in September 2022, most of these projects are complete and there is less demand for additional projects.
Holiday decor and similar non-essential home wares may have peaked in Q4 2021, which was considered post-Covid in many parts of the country. A year later, there is less demand for additional home wares, especially considering inflation. Many families may be planning to spend less on home wares this season and "go easy" for the 2022 holidays. As a result, niche chains that sell home wares, home decor, and gift-type items like scented candles and soaps (Bath & Body Works) may struggle.
Demand May Remain Soft Even as Inflation Drops
Unfortunately, demand may remain soft even if inflation does continue a slow decline. This is because expectation of future prices is one of the determinants of demand. If consumers anticipate that prices will go down further in the future, they will delay purchases today. Therefore, even consumers who highly desire Bed Bath & Beyond's products may not buy them today...in anticipation of future lower prices. This can create a painful waiting game between sellers and buyers - who will blink first?
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