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UBS has forecast that 40,000 to 50,000 stores will close in the U.S. by the end of 2026, downwardly revising research from April 2021 that estimated 80,000 closures. Part of the reason for the change is because physical stores have shown their value over the course of the pandemic.
“Stores have proven their critical role,” wrote UBS analyst Michael Lasser in the report attained by RetailWire. “They are attractive tools for acquiring & interacting with customers. They provide logistics support. They serve as hubs of fulfillment. They are important sources of data. Their importance will persist. We have assumed that 25 percent of online sales will be fulfilled by stores. It could be higher than this.”
He also noted the industry saw 5,000 net store openings in the last few quarters.
A second reason for the reassessment is the rise in inflation. Mr. Lasser wrote, “Retail sales growth has been and will probably be strong for the near future due in part to rapid inflation. Retailers recognize sales in nominal dollars, so this provides support even as costs are growing rapidly too.”
Finally, a third reason is that e-commerce penetration surprisingly pulled back to 17.5 percent in 2021 from 17.9 percent in 2020. Mr. Lasser further wrote that penetration has increased “only modestly” this year, rising 40 basis points versus the 100 basis point annual increase from 2015 to 2019.
UBS still expects e-commerce penetration to increase sharply over the next few years, especially as innovations like social commerce, virtual reality and automation/robotics advance.
The updated forecast, however, assumes e-commerce penetration grows from 18 percent of retail sales in 2021 to 25 percent by 2026, down from its previous target of 27 percent.
Nonetheless, 40,000 to 50,000 stores — or between 4.5 percent to 5.7 percent of overall stores — are expected to close over the next five years as online’s gains drive rationalization. The steepest cuts are expected to be seen in the office supplies, consumer electronics, clothing and accessories, sporting goods and housewares channels. Stores in enclosed malls could account for nearly half of all closures being forecast, assuming 10 to 20 percent of them are closed or redeveloped.