What will 80,000 closed stores mean for America’s retailers?
If you look up, do you see the retail sky falling, or is a brand new day about to dawn?
Headlines that echo forecasts of thousands of stores closing their doors over the next five years seem alarming on the surface, but perhaps it’s a sign of different things — maybe better or maybe not — to come.
CNBC and Yahoo Finance reported yesterday on a new client note issued by UBS that estimates 80,000 locations will be shuttered by the end of 2026. A worst case scenario, according to UBS analysts Michael Lasser and Jay Sole, would see 150,000 stores closing.
The UBS analysts based their 80,000 estimate on the expectation that 27 percent of all goods purchased at retail will be made online by the end of 2026. That’s up 18 percent of total retail today.
American consumers have been shifting a growing percentage of their purchases to online sites for years and the novel coronavirus pandemic further accelerated the trend.
Retailers such as Best Buy, Target and Walmart that had been increasing their digital investments for years were in the best positions to supply consumers looking for a variety of “essential” goods.
The analysts see mall-based retailers being particularly hard hit in the years to come. Specialty apparel and accessories chains and department stores have seen a growing percentage of sales being made online, while Amazon and others are gaining market share.
Amazon, according to a recent Wells Fargo report, is the number one seller of clothing in the U.S. The retail and technology giant now represents 11 to 12 percent of the total U.S. market. Macy’s, the largest mall-based seller of clothing, produces only about one-seventh of Amazon’s sales.
Americans’ migration online is necessitating changes in real estate strategy. Retailers are reconfiguring existing selling space on store floors to expedite local fulfillment of online orders.
The demand for warehouse space is growing exponentially as retailers build supply chains that address new realities. A report issued by JLL last summer forecast that an additional one billion square feet of industrial real estate space would be needed by 2025 to meet the demand of the online market.
- More retail pain ahead: UBS predicts 80,000 stores will close in the U.S. by 2026 – CNBC
- The U.S. to lose 80,000 retail stores by 2026: UBS – Yahoo Finance
- Can Google become a legit alternative to Amazon for sellers (and buyers)? – RetailWire
- Amazon is America’s biggest clothing retailer and there’s no close second – RetailWire
- Retailers need way more fulfillment space to keep up with booming online sales – RetailWire
DISCUSSION QUESTIONS: Do you think the prediction that online sales will grow from 18 to 27 percent of retail’s total between now and 2026 is accurate? How would this affect not only the total number of stores that retailers operate but how these locations are configured?