E-commence will force approximately 75,000 U.S. stores to go out of business by 2026, according to data from UBS. It finds with each 1 percent increase in online penetration, some 8,000 to 8,500 stores will need to close.
Clothing store closures will total 21,000 stores out of the current 82,200. Consumer electronics stores will drop by 10,000 stores of the 39,000 currently standing. Home furnishings will lose 8,000 stores of its current 25,300, and home improvement stores will drop by 1,000 of the nation’s 14,500 hardware stores. And the number of grocery stores will fall by 7,000 from current 89,500 levels.
Thus far this year, more than 5,000 store closures have been announced by retailers, according to a tracker from Coresight Research. And foot traffic at some of the best shopping centers across the country peaked around August 2018 and has since started to fall, according to data analytics firm Thasos.
In March, however, retail sales at U.S. retailers surged 1.6 percent, boosted by gains in motor vehicles and gasoline stations, the most since September 2017. But sales were flat in traditional brick-and-mortar department stores. Sales rose in every category except for stores that sell books, musical instruments and hobby items.
Sales increased for 12 of 13 major retail categories. Sales at clothing stores increased 2 percent, the most since May 2018, while food services posted a 0.8 percent gain, the best since July 2018. Nonstore retailers held up with a second-straight 1.2 percent rise, as sporting goods and hobby stores saw declines.
Despite the UBS estimations, retail developers’ confidence is rising, but they remain cautious after overbuilding in the previous cycle, according to Marcus & Millichap’s 2019 Retail North American Investment Forecast report. In addition, many digital brands are rapidly expanding their brick-and-mortar footprints. And malls and retailers have been creating consumer experiences for their stores, which are looking at trends such as competitive socializing; however, data has yet to confirm this is increasing foot traffic, according to Thasos.
And new grocery store openings increased by 30 percent in 2018 over 2017, with more than 17 million square feet of new space added to the market, according to JLL, which considers grocery is one of the strongest retail sectors. And these retailers are competing against e-commerce, retailers like Walmart has gotten creative.
A new report from Cowen & Co. estimates that curbside grocery pickup will account for $35 billion in sales in the United States by 2020 as it is embraced by a greater proportion of consumers. Cowen analysts estimated that Walmart grocery pickup is contributing significantly to the retailer’s overall U.S. comparable sales growth. They forecast Walmart’s U.S. comparable sales will increase 2.8 percent for the current fiscal year from the prior year, and that grocery pickup will account for between 0.9 and 1.3 percentage points.
More closures are on the horizon. A change is occurring in the retail sector. Traditional malls may be turning more into city centers, with the additions of hotels, gyms, apartment complexes, more food halls and grocery stores.