- Retailers across all sectors are fighting an uphill battle against falling brick-and-mortar sales.
- Analysts suggest that in an effort to bolster e-commerce sales and prevent further losses, companies need to strategically close and consolidate physical retail stores.
- Though the number of suggested closings varies widely by sector, a recent UBS report found that all areas of retail could benefit from having fewer stores.
- More than 7,000 store closings have been announced this year.
- Visit BusinessInsider.com for more stories.
Physical retailers across all sectors of the industry have undeniably felt the sting of declining foot traffic and rising e-commerce sales.
Today, shoppers are spending more money than ever online – a recent UBS report states that US households on average spent $US5,200 online in 2018, compared with $US3,500 five years ago. An increasing number of companies are closing stores across the US – more than 7,000 store closings have been announced in 2019 – though analysts said they’re not shuttering them fast enough.
“More than 15,000 stores across various subsectors have been shuttered or announced to be closed in the last two years,” analysts wrote in the UBS report. “As underperforming retail stores are shuttered, it should help the store productivity of surviving locations.”
To help brands curb the impact of the retail apocalypse and focus on improving online sales, UBS analysts provided a blueprint of recommended store closings for each retail subsector through 2026. Ultimately, analysts said the closings would help brands better focus their efforts, which will be particularly valuable in allowing them to identify a unique advantage in a rising field of competitors.
“Consumers are shopping fewer retailers, which means differentiation is essential to remain relevant,” the report said.
Here’s how many more stores the UBS analysts recommended closing by 2026, according to sector:
Clothing: 20,700 stores
As e-commerce penetration continues to balloon, from 23% in 2019 to a predicted 36% by 2026, UBS recommends that clothing and apparel brands dramatically pick up the pace on shuttering low-performing stores. The more quickly companies like Gap Inc. and L Brands shed the dead weight, the more potential they have to grow, particularly in the fast-growing e-commerce sector.
Consumer electronics: 9,800 stores
UBS analysts said the consumer-electronics category was operating below peak productivity levels and could greatly benefit from a series of closings.
“Despite a recent improvement, we think that sales in the category will likely remain under pressure in the upcoming periods,” analysts wrote. “This is due in part to uncertainty of some product cycles, including large categories such as TV and mobile.”
Home furnishings: 8,400 stores
UBS wrote that while the home-furnishing sector was performing well, the industry was fragmented across its top 10 sellers, leading to a decrease in collective market share.
“Many retailers saw their top-lines decelerate as a result of the intense competition from online and other retailers,” the report said. “This may eventually lead to consolidation if this trend continues.”
Grocery: 7,310 stores
Though grocery performance maintains strong and steady, analysts recommended consolidation as e-commerce options such as FreshDirect, Instacart, and Amazon Prime Pantry grow.
Sporting goods: 5,900 stores
Sporting goods has been a comparatively tumultuous sector, according to UBS. Dick’s Sporting Goods, the leading brand in the category, has only just now stabilised back to 2013 levels following significant events like the bankruptcy of Sports Authority in 2016.
Office supplies: 1,930 stores
Digitization has been particularly tough on the office-supply sector, as students and professionals shy away from physical items like notebooks, pens, and printed copies in favour of their online counterparts. UBS found that core categories including ink, toner, and paper were in serious decline.
Home improvement: 620 stores
The home-improvement category has performed especially well in comparison to its peers.
“The combination of rising sales and store rationalization has aided the rapid growth in sales per store within the category,” the analysts wrote in the report.
Still, they say it could benefit from further consolidation.
Auto parts: 60 stores
Likewise, the auto-parts industry continues to report strong sales thanks to increased car sales. As a result, the UBS analysts proposed very few closings.
“We think that favourable sector dynamics, including lower gas prices, an ageing car population, rising parts complexity, and higher miles driven should continue to support positive trends in the category,” the report said.
Business Insider Emails & Alerts
Site highlights each day to your inbox.