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April 13, 2023: Investment bank UBS has predicted that up to 50,000 US stores could close by 2027 due to reduced consumer spending, tighter credit, and a continued shift to e-commerce. This figure could rise between 70,000 and 90,000 if retail sales fall short of expectations. The forecast is based on the expectation that e-commerce penetration will rise from 20% to 26% by 2027, which UBS calculates will result in 8,000 store closures for every 100 basis points increase in online sales. Bank loans for consumers are likely to become less available, hurting spending levels, and entrepreneurs may find it harder to secure funding for new retail stores. Higher costs, particularly labour, may also result in store closures, particularly in the clothing and accessories, consumer electronics, and home furnishings sectors.
The COVID-19 pandemic has accelerated a trend towards e-commerce, with smaller chains and mom-and-pop stores at the greatest risk. UBS has observed that store closures have accelerated this year and that in 2020, over half of US retail stores were operated by companies with fewer than 20 employees, while chains with fewer than 500 employees operated 68% of stores. According to UBS, home improvement stores, electronics, home furnishings, auto parts, grocery, and sporting goods stores have all reported increases in the average number of employees per store since 2012. The report suggests that in-store fulfilment of online grocery orders may help keep physical grocery stores open.
If 50,000 stores do close by 2027, this could mean that up to $285bn in retail sales could be lost, although this could benefit larger retailers such as Walmart, Home Depot, and Costco. According to UBS, these companies could potentially attract $210bn in sales if store closures reach the forecast. The bank also believes that shopping centre growth will likely be limited in the next five years, meaning that mall-based stores are at greater risk of closure.
