As the United States enters a post-pandemic era, tens of thousands of stores could shut down for good. But it’s not all bad news for some retailers.
In a note published yesterday, UBS researchers predicted that about 80,000 outposts — or roughly 9% of the total retail footprint in the country — will permanently close their doors over the next five years. That would bring the number of retail locations to 797,000 in 2026 from 878,000 in 2020.
The report — published by Jay Sole, Michael Lasser, Atul Maheswari and more analysts — forecasted that the downsizing will vary by sub-sector: It anticipated “modest” shutdowns in home improvement, groceries and auto parts; conversely, home furnishings, consumer electronics and apparel will likely be “the most adversely impacted.” It also suggested that malls could continue to be a source of closures.
However, UBS noted that a number of retailers will be “best positioned” to handle the broader brick-and-mortar downturn or encounter less disruption from the shift to digital — including big-box chain Walmart, membership-only wholesaler Costco and off-price business TJX Companies, which owns Marshalls and TJ Maxx.
What’s more, the researchers forecasted that successful retailers will “evolve and adapt their store formats to be the centerpiece of interacting with consumers, including fulfilling online orders.” Amazon, for instance, continues to scale its fulfillment capabilities: Over the past year, the e-tail behemoth grew its total fulfillment space by more than 100 million square feet to 295 million square feet. Walmart, on the other hand, expanded its fulfillment capacity by 20% to 19 million square feet — the equivalent, analysts said, of adding 21,000 stores during 2020.
Over the past year, UBS reported that retailers shuttered 3,500 outposts, versus 3,900 in the previous annual period. While total spending declined in 2020, consumers largely held back on services purchases and shifted their spending to goods — a tailwind, it said, that helped prevent more store closures. (Consumption of goods improved 6% even as total personal consumption expenditures declined.)
“We think the retail landscape was supported by significant government stimulus and a wallet share shift to goods from services,” the researchers wrote. “However, we think those trends are temporary. As the consumer backdrop normalizes, we think the challenges faced by undifferentiated retailers will become more apparent.”
UBS analysts noted that retailers will undergo a “further rationalization” of brick and mortar this year, due to the sharp increase in e-commerce amid the COVID-19 outbreak. According to the financial services firm, online penetration is expected to hit 27% in 2026, compared with 18% last year, and digital sales fulfilled by stores are anticipated to double from 10% in 2020 to 20% five years from now.