Why specialized brick-and-mortar retailers struggled in 2025

At the commanding heights of the retail industry, companies such as Amazon and Walmart had a strong 2025 despite challenges such as tariffs and cautious consumer spending. But beneath these behemoths, more specialized or category-specific retailers had a tougher time this year, with a number of well-known brands declaring bankruptcy and, as a result, shaking up their respective markets. Here’s a rundown of some major brick-and-mortar shakeups and the effects they’re still having on the industry.

Michaels absorbs fallen rivals: Early in 2025, both Joann Fabrics and Party City declared bankruptcy and left massive holes in the craft and party supplies markets respectively. In the months that followed, discounters bought up former Party City locations, and other retailers upped their game when it came to party supplies. Businesses ranging from Walgreens to secondhand art supply stores started picking up the slack, but it was Michaels that arguably became the de facto successor to Joann.

In the spring, Michaels expanded its selection of balloons, decor and accessories, as searches for party supplies had jumped 155% since the start of 2025. Then in June, it acquired Joann’s intellectual property and started reorganizing its fabric assortment to make it more accessible to former Joann’s customers. Michaels CEO David Boone told Retail Brew in October that both moves were “natural add-ons to the business” as the company commits to an omnichannel business with a strong in-store component.

Pharmacies’ rocky year: Meanwhile, the pharmacy industry underwent a series of shocks and shake-ups, starting with Rite Aid declaring Chapter 11 bankruptcy in May. Initially its goal was to find a buyer, but it was soon offloading stores to former rivals such as Walgreens and grocery chains such as Albertsons. And it turned out these sales were just the beginning of a nationwide shuttering, which ended in October with Rite Aid announcing all of its stores had closed.

The loss of a major competitor could have been good news for Walgreens, but the pharmacy giant has struggled in its own right. CEO Tim Wentworth started the year admitting that locking up so much merchandise had hurt sales. Meanwhile, a consumer advocate in Massachusetts discovered that the company was overcharging for cookies. Then in September, the company announced it would break up its various subsidiaries, including spinning off its pharmacy business with a “renewed focus on retail.” What that means is still unclear, but how this new standalone business corrects for the shortcomings of its past model could be a big story in 2026.

Department store closures: Lastly, department stores, while avoiding any high-profile bankruptcies, saw a number of closures across major brands. Both announcements came early in the year: Kohl’s said it was closing 27 “underperforming stores,” while Macy’s confirmed the closure of 66 “underproductive stores,” as part of its Bold New Chapter strategy, announced in 2024, which includes plans to close 150 stores over three years. Among those closures was an iconic Center City Philadelphia location, which dealt a blow to the city’s struggling downtown shopping district.