Why Your Boutique Is Doing Bad In 2024
2024 has been a generationally bad year to operate a small business. In this blog we will look at the social and economic reasons for the slow down and what we can expect in 2025.
Reasons for the Retail Collapse
1.) Inflation - The cause of inflation is a centuries old debate that includes government overspending, corporate greed and distribution disruption. Whatever the reason for inflation its indisputable that it raised the costs of almost everything in American society at an alarming pace. With the costs driven up on everything from gas to eggs consumers were left with very little discretionary spending left over. Since clothing is not a critical good this meant that Mom's had to spare a new outfit to concentrate more critical purchases for their families.
2.) Boutique Over Saturation - Starting in 2020 and all the way thru 2022 Americans were loaded with cash. They had stimulus money being sent to them and their expenses were at all time lows since they weren't out and about traveling about and using their extra cash on things like expensive cruises or trips to Disneyland. This combined with brick and mortar stores like Ross and TJ Maxx being shuddered up this meant all of the fashion purchasing was filtered to the small online boutique market. In 2021 more boutiques launched then any other year in decades.
Fast forward to 2024 when all brick and mortars, malls and large stores were fully open the boutique market now had a much smaller slice of the pie. With twice as many boutiques and less consumers this meant boutiques were going to struggle.
3.) Consumer Crunch - The consumer is in a unique crunch in 2024 brought on by bad financial choices made in the previous years. With credit card debt at an all time high we can look at statistics in loans on houses and cars and new leases on apartments as a clue that the consumer made big purchases when times were good and cash was coming in and they are now paying the price for the leases and purchases that they got themselves into. This is primarily why many think a recession is looming and the troubles could only just be beginning for boutiques and consumers. No one wants to go in debt and as consumers unwind these bad purchases that were beyond their means their cash flow will start to free up and consumer purchases will pick up. Unfortunately this unwinding can sometimes take years to fully process.
4.) Election Year - Even when the economy is rolling and hitting on all cylinders the clothing market historically sees a slow down in a presidential election year. Consumer confidence is low and fear is high when there is uncertainty about the future of our country and president. This equates to people holding onto their saving and cash and not feeling that normal push to freely purchase. Luckily this one is an easy fix and now that the president is selected peoples perception about the future will began to ease.
5.) End of Trends - There is a theory that the trends follow the money, ie. when consumers have money the manufacturers deliver new and exciting trends. Apparently this theory rings true because as evident in 2023 and 2024 the trends have been severely lacking. No new and fun trend has emerged and furthermore vendors have been releasing mostly staple solids and florals for the last two years. This is no way to excite the customer base and can lead to bad sales for the market as a whole.
Reasons for Optimism
1.) Less Competition - In 2024 we saw an equally historic close down of boutiques in America. Although this is an incredibly sad and depressing thought, the truth is that if you have survived this long you have significantly less competitors competing for your customers. This means that in an economic climate that is remotely more positive than what we're seeing in 2024 means you could start making good profits with the increase in demand.
2.) Less Government More Business- Historically when Republicans have taken the white house shortly after many regulation and impediments to business are relieved which can very quickly launch the economy. With recent reports of up to 1 trillion dollars in Federal cuts this could eventually lead to a strong market with all the new labor participation brought to it.
3.) Tamed Inflation - For six consecutive months inflation has been slowing and this is great news for consumers who will be able to free up more discretionary spending with prices under control.
4.) No More Disruptions - Ports have been open and running at full steam for two years now and this means the fear of inflation by disruption should be tamed. Additionally society at large is getting on with very little societal disruptions compared to years past; wether its a global virus, wars, or riots there is reason for optimism that the future years will be more stable as we historically see in generations past when they overcame global hardship.
If you're a boutique just trying to survive I implore you to keep the fight going and do what you can to stay in business. Not if but when the economy reset and takes off the next critical boom could be your most profitable.