This past week, the restaurant chain Bertucci’s filed for Chapter 11 bankruptcy for the third time since 2018. This has been a sad reality for many well-beloved businesses in the past decade. Over the past few years, many stores and restaurants have had a great struggle. Many factors play into these bankruptcies, but one common reason has been the rise in inflation.
According to bankrate.com, “The current annual inflation rate is 2.4%, less than half a percentage point above the Fed’s 2% target.” This rise is due partly to the increased price of raw materials. Inflation is difficult for the average person and still greatly harms these multi-million-dollar companies. Inflation causes people to have to shop for only the essentials, making them unable to purchase extra things for fun. These “extra” things are all that some of these big retailers have to offer. The well-known toy company Toys “R” Us closed in 2018, and reports say that they were raking in hundreds of millions of dollars in annual revenue. They shut down partly because they could not afford to compete with Walmart and Amazon, which charged less than they did. This was shocking because on the outside, they were a very successful business, but in reality, not even they could stay in business with the state of prices.
Toys “R” Us’s inability to compete with Amazon brings to light another difficulty for those in retail. Many companies, such as Joann Fabrics and Party City, are some of the businesses that have closed. Stores like these have trouble competing with online shopping because there are a lot of benefits to not shopping in person. Some of the things that make online shopping so enticing include convenience, discounts, greater variety, and free shipping. For this reason, many malls seem dead inside because people would rather click a few buttons on a screen than have to drive to look for something that they may not find.
Some of these closings could have big repercussions for the average consumer. One example of this is how, in 2021, CVS announced that it planned to close over 900 locations. This could have large effects on the public because many people rely on CVS to get their medications. If there is no longer a CVS nearby, people have to go through the process of getting their prescriptions through a different company, such as Walgreens. Rite Aid would also be an option to transfer prescriptions to if they were not also closing down many stores. According to the Independent, they are reportedly considering filing for bankruptcy for the second time in two years. Having these two big competitors leave the game in many locations will prove to be a big struggle for people and make them have to go through loops to get their prescriptions.
While many large businesses are shutting down, some are able to keep expanding. Walmart, Costco, and Home Depot are some of these stores. As previously stated, people are only able to afford the essentials. This makes sense because stores like Walmart and Costco are able to continue to stay in business because they are where people get their food. For this reason, it is unlikely that they will go out of business. Home Depot can keep expanding because it is a large source of building supplies. Whenever you need to repair something, Home Depot is where you go.
The only hope of these struggling businesses staying above water is if inflation goes down. Based on its rising levels in the past few years, it is unlikely whether or not this will happen.
