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Tens of thousands of stores could still close even after the pandemic ends

Los Angeles Times via Getty Imag

The pandemic has already slammed stores across the country. The aftermath might not be any easier for retailers.

The pandemic sped up the shift to online shopping, and the continued growth of e-commerce sales will lead to more stores shutting down after the pandemic ends, UBS retail analysts led by Michael Lasser predicted in a report Monday. The report estimates that around 80,000 stores will close over the next five years.

The scenario laid out by UBS is still an improvement from an earlier prediction it released. Last April, UBS analysts estimated that 100,000 retail stores would close by 2025. It brought the expectation down to 80,000 closures by 2026 — not because the analysts see e-commerce having less of an impact, but because they now expect more stores to be used to fulfill online delivery and curbside pickup orders as e-commerce booms.

The apparel, consumer electronics, home furnishings’ and sporting goods’ sectors will close the highest number of stores during that stretch, the analysts project. They believe the number of US malls will also decline over the next five years.

“An enduring legacy of the pandemic is that online penetration rose sharply,” the analysts said. This will “drive further rationalization of retail stores.”

E-commerce sales grew from 14% of total retail sales in 2019 to 18% in 2020. UBS expects them to grow to 27% of retail sales by 2026.

In a worst case scenario, if e-commerce sales increase to 30% of retail sales by 2026, nearly 150,000 stores may close, the analysts said.

Not every type of store will be hurt as badly by growth in e-commerce, however. Closures in the grocery, home improvement and auto parts sectors will be “modest,” the analysts predict. This is because online shopping is less prevalent for these goods.

To be sure, some companies are opening up new stores, particularly discount chains.

Dollar General said last month that it may open 17,000 new stores in the future. Dollar Tree, Burlington Stores, Five Below, TJ Maxx, Aldi and others also plan to open new locations.

Article Topic Follows: Money

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