Tens of thousands of retail stores might have to close over the next few years to keep up with the pace of shoppers shifting from brick-and-mortar retailers to online, according to a new report from UBS.
UBS analysts examined the supply of brick-and-mortar retail locations that would be necessary to align with the demand to shop in those physical locations. What they found paints a bleak picture for the future for retail stores.
“We [estimate] for each 100 bps increase in [e-commerce] penetration (currently 16%), an additional [9,000] stores would need to close,” the UBS analysts write. “To put this in perspective, it would be the equivalent of 7 Toys ‘R’ US chains.”
What’s more, UBS estimates that anywhere from 30,000 to 80,000 stores would need to close to maintain low-single digit sales/store growth should the e-commerce penetration reach 25% of retails sales by 2025. The 80,000 figure assumes that there’s 2% total retail sales growth, while the 30,000 figure assumes there’s 3% sales growth.
In recent years, retail store productivity has lagged overall retail sales growth. Store closures would be necessary to maintain equilibrium.
“This suggests that closures of underperforming stores would need to accelerate in order for the group to return to a higher store productivity growth rates,” the report said.