Why are Department Stores Struggling: Decline of Department Stores in Canada and the U.S.

Since Covid-19, department stores across Canada and the United States have endured a perfect storm of pressures—shifting consumer habits, e-commerce domination, off-price competition, skyrocketing costs, and a generational pivot away from massive multi-floor shopping. What was once a staple of North American retail has rapidly lost its hold: major names like Sears Canada have vanished entirely, while others like Hudson’s Bay, Nordstrom, or Macy’s have raced to close stores and regroup. The COVID-19 pandemic and its aftermath merely quickened an already steady decline, leaving many iconic chains on the brink of department store failures or forced consolidation.

Even short-lived rebounds in sales, prompted by pandemic stimulus checks, could not reverse the structural challenges department stores face. Whether in Canada—where the sector is nearly extinct—or the U.S.—where mall-based anchors are shrinking fast—this “retail apocalypse” era has exposed how sluggish adaptation, outdated store formats, and changing lifestyle preferences can overwhelm a once-dominant retail model. Below, we explore the root causes of this decline of department stores, then examine real-world examples of how some of the best-known names unraveled or adapted.

The “One-Roof” Concept Loses Its Luster: Changing Consumer Habits

In the last five years, consumers have radically reframed the way they shop for apparel, home goods, and beauty—undermining the traditional notion of heading to a department store for all needs. Shoppers now lean heavily on specialized retailers and Amazon-like platforms for convenience, better pricing, and quick fulfillment. As a result, the broad, multi-department approach feels antiquated for those who want targeted purchases without spending half a day browsing. Aside from the old-school loyalists, many no longer see department stores as go-to destinations.

A secondary shift is the growing appeal of “mission shopping,” in which customers visit stores with precise goals, often ignoring aisles of unrelated merchandise. Department stores, built on serendipitous discovery under one giant roof find fewer people wandering in. Instead, shoppers handle routine buys online and venture to curated boutiques or discounters for better bargains. The old advantage of “extensive assortment” is now overshadowed by the seamless, always-in-stock digital sphere. Thus, even if department store product ranges remain vast, they struggle to re-engage a time-strapped audience.

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Drowning in a Sea of Clicks: E-Commerce and Fast-Fashion Waves

The unstoppable rise of online retail—led by giants like Amazon—has been a sledgehammer to many department stores’ core business. Once, a big building brimming with multiple brands could entice a broad customer base in a single outing. Now, that same base can compare prices and styles online within minutes, skipping the drive, the parking, and the high overhead. Even chains that launched their own websites often lagged behind digital natives in speed, personalization, and reliability—leaving them at a severe disadvantage.

Simultaneously, fast-fashion and ultra-fast players (Zara, H&M, Shein) devoured the apparel segment that had been a dependable revenue driver for department stores. Youthful shoppers chasing constant newness see scant reason to browse a department store’s more conservative selection. And to compete, department stores resort to frequent markdowns—a tactic undermined by real-time online competition. The outcome is a sector battered by slashed margins, uneven e-commerce adoption, and a segment of shoppers who expect to satisfy style cravings anywhere except the local big-box anchor.

High Inflation, Low Profits: The Economic Storm for Department Stores

Macroeconomic forces since 2019 have amplified the department store bankruptcies wave. Inflation spiked in the early 2020s, pinching household budgets just as retail reopened post-pandemic. Many consumers delayed nonessential purchases—especially clothing, homewares, and decor—which are bread-and-butter categories for department stores. So even after lockdowns ended, discretionary spending remained subdued, a trend sometimes dubbed “the discretionary recession.” As a result, these giant retailers didn’t see foot traffic rebound to pre-2019 levels, compounding losses.

In parallel, labor shortages and higher wages eroded store profitability. Large-format department stores require scores of sales associates, merchandisers, and customer-service staff. When workers demanded higher pay or simply quit retail roles, the cost burden became harder to absorb. Some chains cut employees to save money, inadvertently turning stores into understaffed shells. Combined with supply chain turmoil—inventory either late or in overstock—the sector found itself consistently behind consumer expectations. By 2025, many U.S. and Canadian department stores were grappling with the cost overhead of giant spaces, minimal foot traffic, and an unwilling consumer base.

Big Boxes, Bigger Headaches: The Challenge of Mammoth Store Formats

For decades, department stores thrived on massive multi-floor footprints in malls or city centers, projecting prominence and convenience. Yet as consumer tastes shifted, these vast spaces often became millstones. With fewer visitors and ballooning overhead—rent, property tax, utilities, maintenance—these store formats proved unsustainably large for a shrinking customer pool. Moreover, the broader collapse in mall traffic stripped department stores of the serendipitous walk-in crowds they once relied on to move merchandise.

This real estate burden explains the rash of department store closures across the continent. Anchors like Macy’s, Kohl’s, and Dillard’s shuttered hundreds of underperforming sites in the U.S., while Hudson’s Bay in Canada announced sweeping exits to slash operational drains. Those who still own their buildings, like some Macy’s flagships, try to monetarily offset losses by selling floors to third-party tenants or repurposing space for offices or other businesses. The old formula of “the bigger, the better” has reversed, pushing surviving department stores to experiment with smaller footprints or off-price spinoffs.

Missing the Millennial Memo: A Generational Shift in Shopping

Department stores historically thrived on Baby Boomers’ brand loyalty and longtime mall-going habits. But as Boomers retire and spend less—and Millennials and Gen Z define the new consumer landscape—these retailers have struggled to connect. Younger shoppers, raised in the digital age, are partial to direct-to-consumer labels, swift fast-fashion cycles, and influencer-driven Instagram or TikTok commerce. In that environment, row upon row of standard apparel or cosmetics under fluorescent lighting feels irrelevant or bland.

This gap explains the department store failures in Canada and the U.S.: younger audiences simply lack the nostalgic attachment that once fueled generational footfall. Brands like Sears or JCPenney, trying to reinvent themselves with halfhearted store redesigns or social media campaigns, failed to match the energy of modern fashion apps or brand pop-ups. Without a compelling in-store vibe or truly unique products, department stores found each successive cohort less likely to enter their doors. The result is a structural decline: as older shoppers fade out, there’s insufficient replacement traffic from the younger set.

Case Studies of Retail Collapse and Reinvention

Hudson’s Bay: The 350-Year-Old Institution Liquidates

For centuries, Hudson’s Bay Company dominated Canadian retail, but by early 2025 it was forced into creditor protection—a near-death spiral for the nation’s oldest store. Over the past five years, The Bay bungled attempts at modernizing, failing to keep up with e-commerce demands or maintain appealing physical stores. Underinvestment led to crumbling interiors, empty shelves, and demoralized staff, eroding any sense of brand prestige. Even the pandemic’s partial rebound couldn’t mend the deep cracks, and HBC’s late shift to online retail proved chaotic, with an internal memo citing a “50% collapse” in e-commerce revenue from 2023 to 2024.

Now the chain is shuttering most of its outlets, effectively ending the last big Canadian department store presence. Experts blame not only digital competition but also poor managerial decisions—cost cuts that gutted store experiences, slow expansions into new formats, and inadequate fulfillment systems. While restructuring may salvage a sliver of the brand, Canada’s department store scene appears nearly extinct, echoing prior failures like Sears Canada’s liquidation and Target Canada’s rapid retreat.

Nordstrom Canada: A Frosty Foray Gone Wrong

Nordstrom, a comparatively robust U.S. department store, entered Canada with fanfare in 2014. Aimed at mid-to-upscale consumers, it pledged refined service and brand curation to stand out in a crowded market. Nordstrom cited perpetual losses with only $515 million and in 2022, abruptly closing all Canadian stores and pulling out entirely. The swift exit shocked observers, given the chain’s strong brand in the U.S.

Nordstrom’s missteps ranged from high operating costs—Canada’s smaller population and distributed geography demanded bigger per-store spending—to underwhelming e-commerce rollouts, leading to insufficient consumer loyalty. Mall traffic never reached the levels Nordstrom anticipated, and local mainstay Holt Renfrew or discounters often lured shoppers away. Even as the parent company invests in digital and off-price in the U.S., the Canadian experiment ended as a cautionary tale about how the retail decline 2025 can crush expansion ambitions if sales don’t justify prime real estate outlays.

Sears Canada: Slow Demise in the Great White North‍

While Sears Canada shuttered its doors in 2017, its downfall is instructive for the entire era. An icon that once dominated mid-tier retail, Sears Canada lost relevance amid e-commerce indifference and brand muddling. By failing to articulate what it stood for—bargains, quality, or trendiness—Sears slid into irrelevance, with malls becoming ghostly. Poor online execution compounded the store’s stale atmosphere, and the chain’s U.S. parent repeatedly stripped assets.

When the company finally filed for bankruptcy, liquidation sales revealed empty aisles once brimming with legacy private labels like Kenmore and Craftsman. Though Sears might have been an early e-commerce adopter, it never fully modernized its site or marketing strategies. The result was a poster child of department store bankruptcies, sparking a domino effect for others in Canada. In many ways, Sears Canada’s collapse foreshadowed the plight facing others post-2019—a cautionary reminder that inertia in a shifting market is fatal.

Target Canada: An Unhappy Landing‍

Though not traditionally a department store, Target Canada’s 2013–2015 implosion parallels the broader meltdown of large-format retail newcomers in Canada. Consumers initially greeted Target’s arrival with hope for American-style deals, only to encounter near-empty shelves, higher prices, and poor local adaptation. Supply chain woes crippled the brand’s credibility within months, leaving store after store devoid of everyday essentials. By 2015, Target threw in the towel, losing nearly $2 billion in less than two years.

The fiasco underscored how tough the market can be for big boxes—especially if they fail at inventory, site selection, and matching U.S. value propositions. Target’s ephemeral presence reinforced the notion that Canadian shoppers won’t forgive logistical blunders, and it signaled that department- or big-box expansions must be carefully tailored. The abrupt demise cast a lingering shadow, warning that even a formidable U.S. retailer can fall prey to local complexities and consumer expectations.

Macy’s: Trimming Down to Survive in America

Macy’s is arguably the emblem of American department store heritage, but it, too, has faced intense pressures since the late 2010s. The chain responded by closing over 280 stores in the past several years, prioritizing a “healthy core” of viable locations. Even so, retail decline 2025 realities persist: inflation, discount competition, and younger consumers uninterested in large, conventional aisles hamper Macy’s attempts to reposition itself.

Executives tried to energize the brand with smaller “Market by Macy’s” sites, off-price “Backstage” corners, and pop-up partnerships like Toys“R”Us. While there have been modest successes, Macy’s overall sales remain below pre-pandemic levels, reflecting that store closures cannot fully solve deeper brand challenges. The chain’s digital strategy has fared better, preventing a steeper drop. Yet the question remains whether Macy’s can truly remake its identity for the next generation—beyond cyclical closures and sporadic store refreshes.

Saks Fifth Avenue: Luxury’s Gambit to Adapt‍

Saks Fifth Avenue stands at the higher end of department store prestige, catering to a more affluent clientele. Luxury retail recovered faster post-pandemic, courtesy of wealthier shoppers resuming discretionary spending. Still, Saks pursued strategic moves to stay relevant, such as separating its e-commerce into a standalone entity—an approach designed to grant the online operation more agility. Critics warned of potential fragmentation for loyal customers, but initial results suggested strong digital sales growth in the aftermath.

In-store, Saks is leaning on service excellence, personal shopping, and curated designer assortments to keep well-heeled consumers engaged. Although not immune to economic cycles, the chain has a cushion in its upscale positioning and smaller store footprint. By emphasizing exclusive collaborations and events, Saks aims to avoid the fate of mid-tier peers who lost brand distinctiveness. That said, even luxury department stores must continuously innovate, as e-commerce competitors like Net-a-Porter vie for the same well-heeled audience online.

A Hopeful Spark: Can Department Stores Find Their Next Chapter?

As we look back on the winding road from 2019 to 2025, it’s clear that department stores haven’t just faced a mild slump—they’ve endured a wholesale shake-up that left many classic names fighting for their existence. Yet while most indicators point to a permanent shift in how consumers shop, not every story spells doom. A handful of retailers have found new life by embracing smaller footprints, fresh digital channels, or service experiences that remind customers why “under one roof” can still be exciting. Younger shoppers may not have grown up with weekend outings to Sears or The Bay, but if department stores can recast themselves as vibrant, curated spaces—complete with pop-ups, local collaborations, or even unexpected gastronomic twists—they might spark renewed curiosity.

Whether this means smaller in-mall concepts, a heavier emphasis on e-commerce, or merging the old and new in surprising ways, the future of department stores hinges on authenticity and quick adaptation. Trust was once a cornerstone of these giant retailers: the notion that you could confidently find a little bit of everything. Bringing that trust into the modern era means making store visits enjoyable, removing the guesswork online, and leaning into the social experience people still crave, especially when the products and ambiance are compelling. With creativity, bold decisions, and a healthy dose of humility, department stores can move beyond simple survival and begin to write a new chapter—one that resonates with the next generation of shoppers.

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