Although I have a coat closet I found no one used it - but slung their coats over the stair banister. So I applied beadboard with a top piece to the wall and put up hooks. Mine is on the wall next to the closet door, which is an ordinary interior door, not bifolds. It does mean all our coats can be seen, but at least they are neat on the hooks and not piled on the stairs.

With the bifold door closet, you could convert it into a mini mudroom. I've seen various tutorials online. Here is an example pic:

The electric panel has to remain accessible, but it may be possible to place a more attractive cabinet door on it - that is what I did to mine when the basement was finished. The carpenter did the work and the inspector approved all the work, so at least in my area, it was an OK thing to do.

The above suggestion was good, but if you want to keep the closet closed I suggest replacing the doors with something mirrored. It would help reflect light and make the area brighter.