What will 80,000 closed stores mean for America’s retailers?

Discussion
Photo: Getty Images
Apr 06, 2021

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.

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?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"This isn’t the death of brick-and-mortar retail, but there will be a significant culling of store count. "
"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?"
"Retailing evolves and the “stores” that evolve with it win. The ones that don’t are shuttered – physically or virtually."

Join the Discussion!

32 Comments on "What will 80,000 closed stores mean for America’s retailers?"


Sort by:   newest | oldest | most voted
Mark Ryski
BrainTrust

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.

Gene Detroyer
BrainTrust

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.

Ricardo Belmar
BrainTrust

“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!

Neil Saunders
BrainTrust
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… Read more »
Gene Detroyer
BrainTrust

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!

Ryan Mathews
BrainTrust

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

Bob Amster
BrainTrust

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

Craig Sundstrom
Guest

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

Lee Peterson
BrainTrust

HBD, Gene!!

Jeff Weidauer
BrainTrust

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.

Dick Seesel
BrainTrust

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.

Peter Smith
Guest
6 months 12 days 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?

Gary Sankary
BrainTrust

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.

Jeff Sward
BrainTrust

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.

DeAnn Campbell
BrainTrust

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.

Gene Detroyer
BrainTrust

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

Steve Dennis
BrainTrust

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

Dave Bruno
BrainTrust

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.

Ryan Mathews
BrainTrust

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.

Gene Detroyer
BrainTrust

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.

Steve Dennis
BrainTrust

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.

Doug Garnett
BrainTrust
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… Read more »
John Karolefski
BrainTrust

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.