bill peters
Analysts at UBS suggest e-commerce is yet to upend brick-and-mortar retail.
Ten years ago, Amazon.com was all the concern in the retail industry, and retailers have adapted to some degree. But UBS analysts suggest that e-commerce in brick-and-mortar stores is far from over.
Analysts predict that around 45,000 retail stores will close over the next five years due to the increasing prevalence of online shopping and big players such as Chinese discount shopping site Temu and Singapore-based fast fashion giant Shein. ing.
Closings will play into the hands of big, deep-pocketed retailers like Walmart (WMT) and Target (TGT), leaving smaller retailers at greater risk, they said. About 16,500 of the store closures are likely to come from the “softline” retail industry, which sells items such as clothing and bedsheets. Department stores and specialty retailers could be particularly hard hit.
“Our fundamental assumption is that as e-commerce becomes more prevalent, these interactions will increasingly take place in consumers' homes,” UBS analysts said in a note Monday. “So the need for stores will only decrease.”
“Indeed, the next wave of e-commerce penetration is likely to be driven in part by third-party players such as Temu and Shein, who don't even have a physical presence in the US,” they added.
They noted that in addition to further investment in digital ordering capabilities, rising rents, wages and other costs will accelerate closures, and a lack of appetite by banks to lend to retailers (a measure that worsened in the first quarter) ) could accelerate store closures, he added. A sign of further closures.
The prediction comes as pandemic-related restrictions in the U.S. are virtually completely lifted and more people return to in-store shopping. But retailers are still trying to overcome weak demand for items such as clothing. Demand is weak as soaring prices for necessities such as food and shelter eat up a large share of consumer budgets.
Clothing retailer Express (EXPRQ) announced on Monday that it has filed for Chapter 11 bankruptcy protection and plans to close dozens of stores. Bed Bath & Beyond Inc. closed all of its physical stores following its bankruptcy last year, but remains online after its acquisition by Overstock.com (now Beyond Inc. (BYON)) and department store chain Macy's Inc. Existing. (M) He announced in February that he would close 150 stores to protect profits and build a “more modern” business.
Analysts at UBS said other department stores such as Nordstrom (JWN) and Kohl's Corporation (KSS) are also vulnerable. But they were more optimistic about companies like running shoe maker On Running (ONON) and Deckers Outdoor Corporation (DECK), which makes shoe brands Ugg, Hoka and Teva. The company cited its tendency to sell products directly to consumers without going through distribution. Real store.
According to UBS, there were 958,533 retail stores in the United States as of the third quarter of last year. As of 2021, 58% of retail stores will be operated by companies with fewer than 20 employees, and 69% of stores will be operated by chains with fewer than 500 employees, analysts said.
They estimate that for every 1% increase in online penetration in the United States, approximately 8,000 retail stores will have to close. Analysts said stores remain important for retailers for picking up and delivering online orders.
“Our analysis assumes that stores remain an important part of the overall retail ecosystem for retailers and consumers,” they wrote. “Simply put,[s] Acts as a hub for fulfillment and support logistics. This is becoming increasingly important as consumers demand convenience and instant delivery. ”
-Bill Peters
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04/24/24 1940ET
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