What will 80,000 closed stores mean for America’s retailers?
Photo: Getty Images

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.

BrainTrust

“This isn’t the death of brick-and-mortar retail, but there will be a significant culling of store count. “

Jeff Weidauer

President, SSR Retail LLC


“Store churn is the metric I find most meaningful. What will new formats be like and how will they integrate digital interaction, headless commerce, and attractive experiences?”

James Tenser

Retail Tech Marketing Strategist | B2B Expert Storytelling™ Guru | President, VSN Media LLC


“Retailing evolves and the “stores” that evolve with it win. The ones that don’t are shuttered – physically or virtually.”

Ryan Mathews

Founder, CEO, Black Monk Consulting

Discussion Questions

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?

Poll

How likely are online sales to grow from the current 18 percent level to 27 percent by the end of 2026?

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32 responses to “What will 80,000 closed stores mean for America’s retailers?”

  1. Mark Ryski Avatar
    Mark Ryski

    There’s no doubt that online will continue to grow, though it’s impossible to say by how much. Who could have predicted the impact the pandemic would have had on online sales? Prognostications, like the ones in this article, often fail to realize that online vs. off-line is not an either or proposition. Retailers, all retailers, need to consider both at the same time. As far as store closures are concerned, notwithstanding the serious impact the pandemic has legitimately caused, there has been a glut of retail space in the U.S. for many years, and much of the poor B and C locations rightly should be closed.

    1. Gene Detroyer Avatar
      Gene Detroyer

      A glut? Oh, yes! If the per capita retail square footage was halved in the U.S., it would still be far greater than most any other country.

    2. Ricardo Belmar Avatar
      Ricardo Belmar

      “Prognostications, like the ones in this article, often fail to realize that online vs. off-line is not an either or proposition.”

      YES! That’s the real conclusion to draw, not what the UBS analysts conclude. Statements about 80k stores closing assume this is a zero-sum game, and it isn’t!

  2. Neil Saunders Avatar
    Neil Saunders

    It is generally accepted that over the next few years, more physical stores will close. However I find analysis of this kind very headline grabbing rather than substantive. A few observations:

    First, stores close. They have always closed. However store also open. What counts is the net number, not the gross number of closings.

    Second, even if the penetration assumption is correct, the analysis seems to ignore the increasing role stores are playing in driving and supporting those online sales. This means the future of stores is far more optimistic than the headline analysis suggests.

    Third, looking at space per capita for the U.S. and comparing it to other countries is not always insightful. The geographical structure of the U.S. and the cost of running stores is very different here to other geographies. For example, the less dense nature of the U.S. means more stores are needed to capture market share. So closing stores often comes with a market share and revenue cost.

    Again, I don’t deny there is pressure on stores, nor that bad space will drop out. However I believe what we will see is the evolution of formats and concepts as well as some closures. The future isn’t as bleak as is being painted.

    1. Gene Detroyer Avatar
      Gene Detroyer

      Yes, certainly the real question is not the number of stores that close, but the amount of revenue that grows. If Macy’s were to close every store but 34th Street, but were able to grow their business 2 percent to 3 percent per year, isn’t that good!

      1. Ryan Mathews Avatar
        Ryan Mathews

        BTW, to the whole RetailWire community. It’s Gene birthday, so — Happy Birthday Gene!

      2. Bob Amster Avatar
        Bob Amster

        I am sure you continue to celebrate but just don’t count…

      3. Craig Sundstrom Avatar
        Craig Sundstrom

        It’s not the number of years, but what you do with them…right?

      4. Gene Detroyer Avatar
        Gene Detroyer

        I hope so!

      5. Lee Peterson Avatar
        Lee Peterson

        HBD, Gene!!

  3. Jeff Weidauer Avatar
    Jeff Weidauer

    I think that prediction is low. Online will continue to grow but at an even faster pace now that things are starting to open back up. This isn’t the death of brick-and-mortar retail, but there will be a significant culling of store count. The U.S. has been over-stored for decades; the stores that remain will be more focused and easier to shop. Whether it’s a new day or the sky is falling is largely dependent on one’s perspective and willingness to change.

  4. Dick Seesel Avatar
    Dick Seesel

    As the article points out, the move from brick-and-mortar to online sales didn’t start in 2020, but the pandemic poured fuel on the fire. One of the questions that we can’t answer yet is how to measure BOPIS sales (including curbside pickup): Do they count strictly as online sales, or is there a grey area? Will the pandemic-driven behavior that spiked online sales continue at the same pace?

    No matter how eager shoppers may be to return to the mall, there are fewer places to shop there. A lot of the future mix between in-store and online depends on how quickly those empty spaces can be reinvented.

  5. Peter Smith Avatar
    Peter Smith

    I have loved Phil Wahba’s (Fortune Magazine) tweet from a couple of years back that retail isn’t dead, only sh***y retail is. I am very optimistic about bricks retail as long as it’s not sh***y. Mark is correct, we are over-built in retail malls in the US and the correction may have been accelerated by the pandemic, but we all knew that it was coming and it won’t slow anytime soon. That said, it is more Darwin than online. To know that 86% of all sales in a pandemic year came form bricks is testament to the value of a great retail experience. So, the question for retailers is…is it?

  6. Gary Sankary Avatar
    Gary Sankary

    I’m increasingly convinced that the future of retail is not an either/or between physical and digital commerce. I think we’re going to see faster growth in blended commerce. Consumers can start a transaction in one channel and finish it in another. That’s really where I think growth is going to be strong. I would put BOPIS in that category — the purchase is made online, but the fulfillment (and credit for the sale) happens at a store. I would guess there will be more showrooming for big ticket, bulky items. I’m thinking play equipment, furniture, and home and garden. Consumers can walk an aisle, scan the items they want, pay on the spot and go home and wait for the products to be delivered. I won’t have to borrow my neighbors truck every spring to get my mulch.

    All of this falls under the category of frictionless commerce. The value prop for the consumer and, when managed well, the retailer are compelling. We are finally delivering on the promise of unified commerce in my opinion.

  7. Jeff Sward Avatar
    Jeff Sward

    I read a lot about store closings and the growth of e-commerce. I read zero about solving the problem of profitability of e-commerce. So Amazon keeps grabbing market share at who-knows-what kind of profitability (especially in apparel) and the mall stores scramble to react to consumer demand for e-commerce but at ever shrinking margins. That’s a competitive dynamic fraught with angst. I’ll agree that e-commerce will continue to grow, but I also think that post-pandemic shopping and buying habits have yet to reveal themselves. Retail offerings like those described in the Dick’s article have an opportunity to level the playing field between physical and e-commerce retailing.

  8. DeAnn Campbell Avatar
    DeAnn Campbell

    The percentage of sales happening online in five years is entirely dependent on how that metric is measured. If you are counting pure transactional clicks of the online “buy” button then I think the percentage will be far higher than 27 percent. But this doesn’t take into account the halo effect that brick-and-mortar has to online sales, nor does it account for the number of people who will only buy online if they can pick up or return that item in person. You can no longer separate metrics for online and offline – it’s all one integrated ecosystem.

    1. Gene Detroyer Avatar
      Gene Detroyer

      As much as we talk about omnichannel and breaking down the silos, we keep returning to discussions that separate online from offline sales.

    2. Steve Dennis Avatar
      Steve Dennis

      It’s almost like it all should be harmonized. 😉

  9. Dave Bruno Avatar
    Dave Bruno

    Eighty-thousand stores in five years? Give me a break. Yes more sales will move online. And yes, stores will close — to be sure. But more stores will open. The role of the store will evolve as shopping behaviors evolve. Stores will continue to evolve into multi-purpose experience centers, featuring any number of reasons to visit: showrooms, education centers, entertainment venues, fulfillment centers, return centers and more. Click-seeking reports like these harken back to the “Retail Apocalypse” warnings from a decade ago. They were wrong then and they are wrong now. Let’s give this amazing, adaptive and intelligent industry a little credit. We’ll evolve as we always have.

  10. Ryan Mathews Avatar
    Ryan Mathews

    I think predicting the future of retail — or anything else — is a dangerous business but, based on where we are today, that projection seems entirely plausible. What will this mean for the number of “stores”? Maybe nothing! Why? Because we have to think of a “store” the way consumers think of them and that is increasingly channel agnostic. Buying from Amazon is really no different than buying from Kroger — you order from the “store”, tender payment, and receive goods. Now if the question is, will physical stores be different? The answer is yes. But the stores of 1980 were configured differently than the stores of 1975 and there was no (public) internet then. Retailing evolves and the “stores” that evolve with it win. The ones that don’t are shuttered – physically or virtually.

  11. Gene Detroyer Avatar
    Gene Detroyer

    Ah! The “retail apocalypse” — a discussion we had no too long ago. Isn’t the real metric that we might discuss total retail sales? Do we really care where the sales come from? If we want a shocking number how about the fact that (prior to the pandemic) online apparel sales were 38.6 percent of total apparel sales.

    Is the headline prediction unfathomable? Consider the P&L of a store. Cut the average sales revenue by 20 percent that goes to online. Keep all the other costs constant. Writing the prescription is easy — close the store.

    I have no idea what the number of stores will be in five years, but I am sure that the retail landscape will be unrecognizable by today’s standards by 2030.

  12. Steve Dennis Avatar
    Steve Dennis

    The big story isn’t the number of stores that will close. The U.S. has had too much retail space for 20 years and the combination of even more overbuilding, the growing irrelevance of many mall anchors and the collapse of the mediocre middle made a harsh reckoning inevitable. The big story is the change role of physical stores and how the false narrative of e-commerce being the primary reason for store closings gets spun again and again. For remarkable brands that aren’t focused on categories where pure e-commerce (i.e. where stores aren’t involved in any material way, i.e. 10 percent to 15 percent of retail) is impossible to compete with the key is to smartly deploy a hybrid and well harmonized strategy that recognizes that physical is far different, but far from dead. I unpack this in great detail in the new edition of my book, out next week.

  13. Doug Garnett Avatar
    Doug Garnett

    We are physical people and that is the limiting factor in any analysis like this. I also wonder how much advantage there is to UBS for publishing a report with a dramatic headline. We know that this often leads to misleading and exaggerated conclusions.

    For example, they focus on store closings and not on openings. In the restaurant business, my niece just signed a lease to open a second restaurant. Why? There is space available in a good location to make it succeed as the pandemic fades. So how many stores will re-open against that 80,000? 40,000? 50,000?

    To my mind it is absurd for them the make a prediction like this amid the pandemic. These estimates are so sensitive that even small wiggles will change the totals a lot.

    That said, malls are suffering and seem likely to continue to suffer — that’s where my fears are largest. What about percentages? This seems optimistic for a 2026 date. Note that I just read this morning a Lyft article from 2016 predicting that by 2021 most cars on the road will be auto-drive. We LOVE Armageddon stories.

  14. John Karolefski Avatar
    John Karolefski

    I see online grocery shopping growing with curbside pickup becoming a mainstay for supermarkets. I don’t see many grocery stores closing, even though many markets are over-stored. However smart supermarket operators need to be more responsive to shoppers and their health and safety concerns — or they will go out of business.

  15. Lee Peterson Avatar
    Lee Peterson

    Smaller, better. That’s the future of physical retail. Sure, fewer, but with the addition of fulfillment for many implies physically smaller as well — and why not? Showroom stores have been well accepted by consumers and should be more-so by operators. But “better” is also key; customer service, design, brand right entertainment, digital that aids physical (apps) . . . there are countless technologies now that can help physical retail flow well in the 21st century, let’s get on with it! There’s nothing wrong with having fewer stores if in fact, they’re better. Nothing about this downsizing is negative to me.

  16. Venky Ramesh Avatar
    Venky Ramesh

    Yes, the online channel will grow substantially in the near future, but not in isolation. Rather than the stores closing, I think the stores will still play a key role, but the stores’ role will change as we evolve. Stores as experience centers, stores as fulfillment centers, stores as display centers, etc. will start becoming the new norm rather than stores as the sales center, which is currently their primary function.

  17. paul righello Avatar
    paul righello

    Yes, I think shift to online will happen. B&M retailers are helping it along too with lack of assortment, service, and inventory. Even before the pandemic I noticed shrinking assortments across major retailers and lower service levels. More and more I have been forced to shop online to get what I once used to purchase from a physical store.

    Two recent examples:

    Just last week I went to a Verizon store to buy a new phone. The associates told me they could not help me because they were closing in 10 minutes (it was 4:50pm). I asked them why they thought it was fine to lose a sale of a new iPhone; they just shrugged and said come back another day before 4:30pm (I had already left work early to get there for this purchase and they close at 5pm … no regard for folks working 8-5 I guess). So online I went to order it.

    Same thing a few days later when I went to Best Buy to purchase a new iPad. This time a very helpful clerk walked me through it all and I said let’s do it; the grey one please. Then he laughed and said oh we don’t have these here but you can order them. Really? You don’t carry them? Well we do but we are always out. You can order one and come back to pick it up. Nope, I live 30 minutes away and I can order one myself, but thank you. So again, online to order and it arrives today.

    I want to shop B&M to support people’s livelihoods and get instant gratification, but so often now there is no point. B&M will be niche in the future is my prediction.

  18. Cynthia Holcomb Avatar
    Cynthia Holcomb

    Online sales will grow, stores will close. Resulting in an even bigger ROI drain for retailers due to the costs of product returns and product disposal costs. Returns will hit landfills while delivery trucks speed constantly through neighborhoods. But I digress.

    Basics of everything will be offered to consumers on huge digital marketplaces for the masses, leading to product sameness for the many, while higher-priced specialty products will be offered to consumers in the know of where to shop. And in a very short time, shopping online will lead to tap, tap, tap, exhaustion and shopping fatigue as a consumer sorts through hundreds of thousands of extremely similar products to find the one.

    In time, after online shopping has replaced physical shopping, new versions of in-person shopping will be created. At some point in the future, the lack of efficiency and tedium of online shopping will be augmented or replaced — replaced by retailers who understand the human value of the aesthetic and tactile experience of trying on clothes, holding a hammer to see how it feels in one’s hand or how important it is to be able to select the cutest goldfish in the aquarium with the most personality, in person before buying.

  19. James Tenser Avatar
    James Tenser

    Like just about all innovations, e-commerce behavior is subject to the classic adoption “S” curve. We’re in the steep part right now but the present rate of increase cannot continue in perpetuity. There is a theoretical ceiling to digital shopping, and the levels will vary by channel and product category.

    Store churn is the metric I find most meaningful. What will new formats be like and how will they integrate digital interaction, headless commerce, and attractive experiences? How much share will be sopped up by the most powerful omnichannel retailers in Food-Drug-Mass?

    Store closures are tied to this, of course, but it really applies most to obsolete formats, including stodgy anchor stores and trendy mall boutique formats that were perishable by design. While I’m truly sorry for their discharged employees, there’s some natural selection at work here and the survivors will be stronger for it.

  20. Yogesh Kulkarni Avatar
    Yogesh Kulkarni

    In my view, one should take these types of projections with a pinch of salt as the predictions are made with what we know at this very moment. There are so many new variables- what the store of the future will look like, will we have distribution or micro-fulfillment capabilities at the store or close to where the customer demand originates, how the AI/Robotics tech evolves etc. One thing we know for sure is that we won’t talk about store vs. online anymore in 2026 and the physical and online worlds will be intertwined in a way that the customer truly gets a seamless experience. For most retailers, the customer relevance and their share of wallet will be the primary metrics to worry about that the actual physical number of stores they own.

  21. Craig Sundstrom Avatar
    Craig Sundstrom

    80,000 closed stores … that was a Dean Martin movie, wasn’t it? (What: “10,000 Bedrooms”? Oh, never mind….) It sounds like a lot, but it’s not very meaningful without some context of how many will be left open. And even more importantly than gross store count is how sales are distributed: will they grow ever more concentrated into a smaller number of sellers?

    Smart money, as always, is on a continuation of current trends, more than obsessing on specific numbers: online’s share of sales will grow and weaker players — be they formats (enclosed malls, department stores) or actual companies — will continue to disappear. The big “if” is whether/not “free” everything (and other unsustainable ideas) will continue, or will fiscal reality crash the party.

  22. Ricardo Belmar Avatar
    Ricardo Belmar

    I take issue with headlines like these from analysts who strictly look at the financials and draw operational conclusions about the retail industry.

    Yes, stores close. All. The. Time. It’s a natural part of the business cycle that all retailers endure. Yes, the pandemic, in many cases, accelerated store closings, but let’s face it — these were primarily from brands in distress before the pandemic. Those stores would have closed anyway. What these reports do not account for is store openings. 2021 is on track to open more stores than will close across all segments. They also don’t account for the growth in total retail sales year over year. Even in 2020 retail grew, and not by a little! That growth is not just due to e-commerce sales!

    Yes, the U.S. is over-stored, but primarily because the geography here is such that the distances between consumers can often be significant and that warrants more stores. It’s not reasonable to compare U.S. store density with, say, the UK, or Germany given the vast differences in geography and population density. Stores in the U.S are poorly distributed more so than there are too many of them. Retailers in past decades grew over-optimistic about locating stores in adjacent zip codes when the population density looked attractive. For example, I can drive a little over an hour where I live and reach 5 different Macy’s stores. Do I need 5 Macy’s in my area? No. But I only reach 3 Apple stores and 2 Nike stores. I could probably use more of those!

    Finally, retail is not a zero-sum game — just because online e-commerce sales increases as a portion of total retail sales is not a direct correlation to the number of physical stores. In fact, most e-commerce digital natives realize that their sales hit a ceiling if they stick to online sales only. Why? Customer acquisition becomes too expensive without opening physical stores. Most e-commerce retailers that reach this plateau and open stores quickly find that adjacent zip codes to those stores show an increase in online sales. This symbiotic sales relationship grows and grows as you add more stores. Digital doesn’t just meet physical, digital NEEDS physical and physical NEEDS digital. Both have an important role to play in the future of retail!

32 Comments
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Mark Ryski
Mark Ryski
Trusted Member
2 years ago

There’s no doubt that online will continue to grow, though it’s impossible to say by how much. Who could have predicted the impact the pandemic would have had on online sales? Prognostications, like the ones in this article, often fail to realize that online vs. off-line is not an either or proposition. Retailers, all retailers, need to consider both at the same time. As far as store closures are concerned, notwithstanding the serious impact the pandemic has legitimately caused, there has been a glut of retail space in the U.S. for many years, and much of the poor B and C locations rightly should be closed.

11
Gene Detroyer
Gene Detroyer
Trusted Member
Reply to  Mark Ryski
2 years ago

A glut? Oh, yes! If the per capita retail square footage was halved in the U.S., it would still be far greater than most any other country.

3
Ricardo Belmar
Ricardo Belmar
Active Member
Reply to  Mark Ryski
2 years ago

“Prognostications, like the ones in this article, often fail to realize that online vs. off-line is not an either or proposition.”

YES! That’s the real conclusion to draw, not what the UBS analysts conclude. Statements about 80k stores closing assume this is a zero-sum game, and it isn’t!

3
Neil Saunders
Neil Saunders
Noble Member
2 years ago

It is generally accepted that over the next few years, more physical stores will close. However I find analysis of this kind very headline grabbing rather than substantive. A few observations:

First, stores close. They have always closed. However store also open. What counts is the net number, not the gross number of closings.

Second, even if the penetration assumption is correct, the analysis seems to ignore the increasing role stores are playing in driving and supporting those online sales. This means the future of stores is far more optimistic than the headline analysis suggests.

Third, looking at space per capita for the U.S. and comparing it to other countries is not always insightful. The geographical structure of the U.S. and the cost of running stores is very different here to other geographies. For example, the less dense nature of the U.S. means more stores are needed to capture market share. So closing stores often comes with a market share and revenue cost.

Again, I don’t deny there is pressure on stores, nor that bad space will drop out. However I believe what we will see is the evolution of formats and concepts as well as some closures. The future isn’t as bleak as is being painted.

15
Gene Detroyer
Gene Detroyer
Trusted Member
Reply to  Neil Saunders
2 years ago

Yes, certainly the real question is not the number of stores that close, but the amount of revenue that grows. If Macy’s were to close every store but 34th Street, but were able to grow their business 2 percent to 3 percent per year, isn’t that good!

3
Ryan Mathews
Ryan Mathews
Active Member
Reply to  Gene Detroyer
2 years ago

BTW, to the whole RetailWire community. It’s Gene birthday, so — Happy Birthday Gene!

10
Bob Amster
Bob Amster
Active Member
Reply to  Ryan Mathews
2 years ago

I am sure you continue to celebrate but just don’t count…

3
Craig Sundstrom
Craig Sundstrom
Active Member
Reply to  Bob Amster
2 years ago

It’s not the number of years, but what you do with them…right?

1
Gene Detroyer
Gene Detroyer
Trusted Member
Reply to  Craig Sundstrom
2 years ago

I hope so!

0
Lee Peterson
Lee Peterson
Member
Reply to  Gene Detroyer
2 years ago

HBD, Gene!!

1
Jeff Weidauer
Jeff Weidauer
Member
2 years ago

I think that prediction is low. Online will continue to grow but at an even faster pace now that things are starting to open back up. This isn’t the death of brick-and-mortar retail, but there will be a significant culling of store count. The U.S. has been over-stored for decades; the stores that remain will be more focused and easier to shop. Whether it’s a new day or the sky is falling is largely dependent on one’s perspective and willingness to change.

-3
Dick Seesel
Dick Seesel
Active Member
2 years ago

As the article points out, the move from brick-and-mortar to online sales didn’t start in 2020, but the pandemic poured fuel on the fire. One of the questions that we can’t answer yet is how to measure BOPIS sales (including curbside pickup): Do they count strictly as online sales, or is there a grey area? Will the pandemic-driven behavior that spiked online sales continue at the same pace?

No matter how eager shoppers may be to return to the mall, there are fewer places to shop there. A lot of the future mix between in-store and online depends on how quickly those empty spaces can be reinvented.

7
Peter Smith
Peter Smith
2 years ago

I have loved Phil Wahba’s (Fortune Magazine) tweet from a couple of years back that retail isn’t dead, only sh***y retail is. I am very optimistic about bricks retail as long as it’s not sh***y. Mark is correct, we are over-built in retail malls in the US and the correction may have been accelerated by the pandemic, but we all knew that it was coming and it won’t slow anytime soon. That said, it is more Darwin than online. To know that 86% of all sales in a pandemic year came form bricks is testament to the value of a great retail experience. So, the question for retailers is…is it?

3
Gary Sankary
Gary Sankary
Active Member
2 years ago

I’m increasingly convinced that the future of retail is not an either/or between physical and digital commerce. I think we’re going to see faster growth in blended commerce. Consumers can start a transaction in one channel and finish it in another. That’s really where I think growth is going to be strong. I would put BOPIS in that category — the purchase is made online, but the fulfillment (and credit for the sale) happens at a store. I would guess there will be more showrooming for big ticket, bulky items. I’m thinking play equipment, furniture, and home and garden. Consumers can walk an aisle, scan the items they want, pay on the spot and go home and wait for the products to be delivered. I won’t have to borrow my neighbors truck every spring to get my mulch.

All of this falls under the category of frictionless commerce. The value prop for the consumer and, when managed well, the retailer are compelling. We are finally delivering on the promise of unified commerce in my opinion.

6
Jeff Sward
Jeff Sward
Active Member
2 years ago

I read a lot about store closings and the growth of e-commerce. I read zero about solving the problem of profitability of e-commerce. So Amazon keeps grabbing market share at who-knows-what kind of profitability (especially in apparel) and the mall stores scramble to react to consumer demand for e-commerce but at ever shrinking margins. That’s a competitive dynamic fraught with angst. I’ll agree that e-commerce will continue to grow, but I also think that post-pandemic shopping and buying habits have yet to reveal themselves. Retail offerings like those described in the Dick’s article have an opportunity to level the playing field between physical and e-commerce retailing.

2
DeAnn Campbell
DeAnn Campbell
Active Member
2 years ago

The percentage of sales happening online in five years is entirely dependent on how that metric is measured. If you are counting pure transactional clicks of the online “buy” button then I think the percentage will be far higher than 27 percent. But this doesn’t take into account the halo effect that brick-and-mortar has to online sales, nor does it account for the number of people who will only buy online if they can pick up or return that item in person. You can no longer separate metrics for online and offline – it’s all one integrated ecosystem.

5
Gene Detroyer
Gene Detroyer
Trusted Member
Reply to  DeAnn Campbell
2 years ago

As much as we talk about omnichannel and breaking down the silos, we keep returning to discussions that separate online from offline sales.

0
Steve Dennis
Steve Dennis
Member
Reply to  DeAnn Campbell
2 years ago

It’s almost like it all should be harmonized. 😉

1
Dave Bruno
Dave Bruno
Member
2 years ago

Eighty-thousand stores in five years? Give me a break. Yes more sales will move online. And yes, stores will close — to be sure. But more stores will open. The role of the store will evolve as shopping behaviors evolve. Stores will continue to evolve into multi-purpose experience centers, featuring any number of reasons to visit: showrooms, education centers, entertainment venues, fulfillment centers, return centers and more. Click-seeking reports like these harken back to the “Retail Apocalypse” warnings from a decade ago. They were wrong then and they are wrong now. Let’s give this amazing, adaptive and intelligent industry a little credit. We’ll evolve as we always have.

3
Ryan Mathews
Ryan Mathews
Active Member
2 years ago

I think predicting the future of retail — or anything else — is a dangerous business but, based on where we are today, that projection seems entirely plausible. What will this mean for the number of “stores”? Maybe nothing! Why? Because we have to think of a “store” the way consumers think of them and that is increasingly channel agnostic. Buying from Amazon is really no different than buying from Kroger — you order from the “store”, tender payment, and receive goods. Now if the question is, will physical stores be different? The answer is yes. But the stores of 1980 were configured differently than the stores of 1975 and there was no (public) internet then. Retailing evolves and the “stores” that evolve with it win. The ones that don’t are shuttered – physically or virtually.

2
Gene Detroyer
Gene Detroyer
Trusted Member
2 years ago

Ah! The “retail apocalypse” — a discussion we had no too long ago. Isn’t the real metric that we might discuss total retail sales? Do we really care where the sales come from? If we want a shocking number how about the fact that (prior to the pandemic) online apparel sales were 38.6 percent of total apparel sales.

Is the headline prediction unfathomable? Consider the P&L of a store. Cut the average sales revenue by 20 percent that goes to online. Keep all the other costs constant. Writing the prescription is easy — close the store.

I have no idea what the number of stores will be in five years, but I am sure that the retail landscape will be unrecognizable by today’s standards by 2030.

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Steve Dennis
Steve Dennis
Member
2 years ago

The big story isn’t the number of stores that will close. The U.S. has had too much retail space for 20 years and the combination of even more overbuilding, the growing irrelevance of many mall anchors and the collapse of the mediocre middle made a harsh reckoning inevitable. The big story is the change role of physical stores and how the false narrative of e-commerce being the primary reason for store closings gets spun again and again. For remarkable brands that aren’t focused on categories where pure e-commerce (i.e. where stores aren’t involved in any material way, i.e. 10 percent to 15 percent of retail) is impossible to compete with the key is to smartly deploy a hybrid and well harmonized strategy that recognizes that physical is far different, but far from dead. I unpack this in great detail in the new edition of my book, out next week.

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Doug Garnett
Doug Garnett
Member
2 years ago

We are physical people and that is the limiting factor in any analysis like this. I also wonder how much advantage there is to UBS for publishing a report with a dramatic headline. We know that this often leads to misleading and exaggerated conclusions.

For example, they focus on store closings and not on openings. In the restaurant business, my niece just signed a lease to open a second restaurant. Why? There is space available in a good location to make it succeed as the pandemic fades. So how many stores will re-open against that 80,000? 40,000? 50,000?

To my mind it is absurd for them the make a prediction like this amid the pandemic. These estimates are so sensitive that even small wiggles will change the totals a lot.

That said, malls are suffering and seem likely to continue to suffer — that’s where my fears are largest. What about percentages? This seems optimistic for a 2026 date. Note that I just read this morning a Lyft article from 2016 predicting that by 2021 most cars on the road will be auto-drive. We LOVE Armageddon stories.

3
John Karolefski
John Karolefski
Member
2 years ago

I see online grocery shopping growing with curbside pickup becoming a mainstay for supermarkets. I don’t see many grocery stores closing, even though many markets are over-stored. However smart supermarket operators need to be more responsive to shoppers and their health and safety concerns — or they will go out of business.

2
Lee Peterson
Lee Peterson
Member
2 years ago

Smaller, better. That’s the future of physical retail. Sure, fewer, but with the addition of fulfillment for many implies physically smaller as well — and why not? Showroom stores have been well accepted by consumers and should be more-so by operators. But “better” is also key; customer service, design, brand right entertainment, digital that aids physical (apps) . . . there are countless technologies now that can help physical retail flow well in the 21st century, let’s get on with it! There’s nothing wrong with having fewer stores if in fact, they’re better. Nothing about this downsizing is negative to me.

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Venky Ramesh
Venky Ramesh
2 years ago

Yes, the online channel will grow substantially in the near future, but not in isolation. Rather than the stores closing, I think the stores will still play a key role, but the stores’ role will change as we evolve. Stores as experience centers, stores as fulfillment centers, stores as display centers, etc. will start becoming the new norm rather than stores as the sales center, which is currently their primary function.

1
paul righello
paul righello
2 years ago

Yes, I think shift to online will happen. B&M retailers are helping it along too with lack of assortment, service, and inventory. Even before the pandemic I noticed shrinking assortments across major retailers and lower service levels. More and more I have been forced to shop online to get what I once used to purchase from a physical store.

Two recent examples:

Just last week I went to a Verizon store to buy a new phone. The associates told me they could not help me because they were closing in 10 minutes (it was 4:50pm). I asked them why they thought it was fine to lose a sale of a new iPhone; they just shrugged and said come back another day before 4:30pm (I had already left work early to get there for this purchase and they close at 5pm … no regard for folks working 8-5 I guess). So online I went to order it.

Same thing a few days later when I went to Best Buy to purchase a new iPad. This time a very helpful clerk walked me through it all and I said let’s do it; the grey one please. Then he laughed and said oh we don’t have these here but you can order them. Really? You don’t carry them? Well we do but we are always out. You can order one and come back to pick it up. Nope, I live 30 minutes away and I can order one myself, but thank you. So again, online to order and it arrives today.

I want to shop B&M to support people’s livelihoods and get instant gratification, but so often now there is no point. B&M will be niche in the future is my prediction.

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Cynthia Holcomb
Cynthia Holcomb
Member
2 years ago

Online sales will grow, stores will close. Resulting in an even bigger ROI drain for retailers due to the costs of product returns and product disposal costs. Returns will hit landfills while delivery trucks speed constantly through neighborhoods. But I digress.

Basics of everything will be offered to consumers on huge digital marketplaces for the masses, leading to product sameness for the many, while higher-priced specialty products will be offered to consumers in the know of where to shop. And in a very short time, shopping online will lead to tap, tap, tap, exhaustion and shopping fatigue as a consumer sorts through hundreds of thousands of extremely similar products to find the one.

In time, after online shopping has replaced physical shopping, new versions of in-person shopping will be created. At some point in the future, the lack of efficiency and tedium of online shopping will be augmented or replaced — replaced by retailers who understand the human value of the aesthetic and tactile experience of trying on clothes, holding a hammer to see how it feels in one’s hand or how important it is to be able to select the cutest goldfish in the aquarium with the most personality, in person before buying.

2
James Tenser
James Tenser
Member
2 years ago

Like just about all innovations, e-commerce behavior is subject to the classic adoption “S” curve. We’re in the steep part right now but the present rate of increase cannot continue in perpetuity. There is a theoretical ceiling to digital shopping, and the levels will vary by channel and product category.

Store churn is the metric I find most meaningful. What will new formats be like and how will they integrate digital interaction, headless commerce, and attractive experiences? How much share will be sopped up by the most powerful omnichannel retailers in Food-Drug-Mass?

Store closures are tied to this, of course, but it really applies most to obsolete formats, including stodgy anchor stores and trendy mall boutique formats that were perishable by design. While I’m truly sorry for their discharged employees, there’s some natural selection at work here and the survivors will be stronger for it.

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Yogesh Kulkarni
Yogesh Kulkarni
2 years ago

In my view, one should take these types of projections with a pinch of salt as the predictions are made with what we know at this very moment. There are so many new variables- what the store of the future will look like, will we have distribution or micro-fulfillment capabilities at the store or close to where the customer demand originates, how the AI/Robotics tech evolves etc. One thing we know for sure is that we won’t talk about store vs. online anymore in 2026 and the physical and online worlds will be intertwined in a way that the customer truly gets a seamless experience. For most retailers, the customer relevance and their share of wallet will be the primary metrics to worry about that the actual physical number of stores they own.

2
Craig Sundstrom
Craig Sundstrom
Active Member
2 years ago

80,000 closed stores … that was a Dean Martin movie, wasn’t it? (What: “10,000 Bedrooms”? Oh, never mind….) It sounds like a lot, but it’s not very meaningful without some context of how many will be left open. And even more importantly than gross store count is how sales are distributed: will they grow ever more concentrated into a smaller number of sellers?

Smart money, as always, is on a continuation of current trends, more than obsessing on specific numbers: online’s share of sales will grow and weaker players — be they formats (enclosed malls, department stores) or actual companies — will continue to disappear. The big “if” is whether/not “free” everything (and other unsustainable ideas) will continue, or will fiscal reality crash the party.

2
Ricardo Belmar
Ricardo Belmar
Active Member
2 years ago

I take issue with headlines like these from analysts who strictly look at the financials and draw operational conclusions about the retail industry.

Yes, stores close. All. The. Time. It’s a natural part of the business cycle that all retailers endure. Yes, the pandemic, in many cases, accelerated store closings, but let’s face it — these were primarily from brands in distress before the pandemic. Those stores would have closed anyway. What these reports do not account for is store openings. 2021 is on track to open more stores than will close across all segments. They also don’t account for the growth in total retail sales year over year. Even in 2020 retail grew, and not by a little! That growth is not just due to e-commerce sales!

Yes, the U.S. is over-stored, but primarily because the geography here is such that the distances between consumers can often be significant and that warrants more stores. It’s not reasonable to compare U.S. store density with, say, the UK, or Germany given the vast differences in geography and population density. Stores in the U.S are poorly distributed more so than there are too many of them. Retailers in past decades grew over-optimistic about locating stores in adjacent zip codes when the population density looked attractive. For example, I can drive a little over an hour where I live and reach 5 different Macy’s stores. Do I need 5 Macy’s in my area? No. But I only reach 3 Apple stores and 2 Nike stores. I could probably use more of those!

Finally, retail is not a zero-sum game — just because online e-commerce sales increases as a portion of total retail sales is not a direct correlation to the number of physical stores. In fact, most e-commerce digital natives realize that their sales hit a ceiling if they stick to online sales only. Why? Customer acquisition becomes too expensive without opening physical stores. Most e-commerce retailers that reach this plateau and open stores quickly find that adjacent zip codes to those stores show an increase in online sales. This symbiotic sales relationship grows and grows as you add more stores. Digital doesn’t just meet physical, digital NEEDS physical and physical NEEDS digital. Both have an important role to play in the future of retail!

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