According to a recent report, small retailers have closed down 40,000 stores over the past decade, while chains have added 17,000 stores over the same period. The report suggests that this trend is likely to continue as major players in the dollar, discount, home improvement, and mass channels continue to grow their store counts. Additionally, digital natives with brands like Warby Parker and Vuori are also expected to increase their store counts.
UBS, the financial services firm, predicts that somewhere between 40,000 and 50,000 stores will close in the U.S. by 2028, down from its previous forecast of 80,000 locations. The report indicates that the total number of stores, excluding gas stations, is around 880,000. UBS based its projections on an annual growth rate of four percent.
The report also suggests that retailers selling clothing and accessories, consumer electronics, and home furnishings will take the biggest hit, with 23,500 stores expected to close by 2026.
However, stores have become increasingly important to retail operations in recent years. Many aggressive operators took advantage of cheap rents brought about by the pandemic to open new locations with a shorter path to profitability. Retailers have also made stores central to their fulfillment of online orders through pickup and store-to-door delivery operations. For example, Target fulfills more than 95 percent of its online orders from local stores.
The report expects online sales to grow to 26 percent of total retail sales, up from 20 percent. It also predicts that dollar store chains, discounters, and digital natives with brands like Warby Parker and Vuori will continue to add stores in the coming years.
In conclusion, the retail landscape in the U.S. is undergoing significant changes, with small retailers closing thousands of stores while chains and digital natives continue to expand. Despite the projected closure of 40,000 to 50,000 stores by 2028, there is still value in physical stores, as retailers leverage them for efficient fulfillment and a better customer experience. The report also highlights the resilience of certain sectors, such as dollar stores and discounters, along with the growth potential of online sales.