The Swiss bank UBS has predicted that the proliferation of e-commerce business, companies and platforms would result in eth forced closure of more stores across the U.S. for businesses like clothing retailers, consumer electronics companies and home furnishing.
“Store rationalization needs to accelerate meaningfully as online penetration continues to rise,” the investment firm said in a note to its clients this week. In the note, the bank’s analysts Jay Sole and Michael Lasser said that in the US, about 75,000 more retail stores would have to close down their shops, excluding restaurants, by 2026.
This calculation was made by the analysts on the assumption that the total share of total retail sales in the U.S. would be 25 per cent for e-retailers by 2026 compared to the current market share of 16 per cent. This means that about 8,000 to 8,500 stores need to be closed for every 1 per cent increase in online penetration into the total retail market of the US. And the note also made a special mention of Amazon in fueling that growth in market share and it is being estimated that the largest online retailer of the world would capture at least half of the total U.S. e-commerce market.
The UBS report also estimated a breakup of the 75,000 closures – comprising of about 21,000 clothing stores, 10,000 consumer electronics stores, 8,000 home furnishing stores and 1,000 home improvement stores. This estimation was made on the basis of growth rates of online penetration within each retail subsector assumed by the UBS. Additionally, in case online grocery penetration increased to 10 per cent by 2026 from the current 2 per cent, about 7,000 grocery stores could also get closed.
The productivity and output of the stores throughout the country was also analyzed in the UBS report. The bank said that there was a growth in productivity through 2018 with respect to the amount of sales made per store.
However, the firm said: “We believe this pace of store productivity improvement is unlikely to be sustained in 2019 as the boost from fiscal stimulus fades. … This will likely lead to an acceleration in physical store closures in the upcoming year.”
According to a tracker by Coresight Research, closures of more than 5000 stores have already been announced by various companies already so far this in the current year. Such companies include names like Gap, Victoria’s Street, Charlotte Russe and Gymboree — which indicates that there are a number of clothing companies in that list of closures.
However, as more stores close “it should help the store productivity of surviving locations,” Lasser and Sole also said.
(Adapted from CNBC.com)