- 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 be smart about closing and consolidating physical retail stores.
- Though the number of suggested closures varies widely sector, a recent UBS report found that all areas of retail could benefit from having fewer stores.
- More than 7,000 store closures have been announced so far in 2019.
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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 online spend per US household was $5,200 in 2018, compared to $3,500 five years ago. An increasing number of companies are closing stores nationwide — more than 7,000 store closures have been announced so far 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 report. "As underperforming retail stores are shuttered, it should help the store productivity of surviving locations."
In order to help brands curb the impact of the retail apocalypse and set their sights on improving online sales, UBS analysts provided a blueprint of recommended store closures for each retail subsector through 2026. Ultimately, analysts said the closures 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 stated.
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
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UBS analysts said that the consumer electronics category is currently operating below peak productivity levels and could greatly benefit from a series of closures.
"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 is performing well, the industry is 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. This may eventually lead to consolidation if this trend continues," the report stated.
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