U.S. retailers have closed more than 9,200 stores this year as of late November, according to Coresight Research, compared with just over 5,800 for all of 2018. While this may seem to paint a dangerously gloomy picture for the future of retail, industry analysts suggest it may actually be a sign that retailers have finally gleaned and are utilizing the right data to resize their brick-and-mortar businesses for the way consumers actually shop today.
According to a Yahoo! Finance article, analysts from the investment bank UBS told clients earlier this year they expect to see this type of closure continue as e-commerce takes a larger share of customer dollars. “Store rationalization needs to accelerate meaningfully as online penetration continues to rise,” UBS analysts wrote in a note. If e-commerce accounts for 25% of retail sales by 2026, about 75,000 more stores will need to close, they wrote. The upside is that these closures “should help the store productivity of surviving locations.”
Further, a new report from Placer.ai, an analytics platform, went so far as to name “store optimization” as one of the trends most likely to define retail in 2020. An example of a successful optimization initiative discussed in the study is Walmart’s decision to close multiple stores earlier this year. While it might have appeared to outsiders that online retailers like Amazon would benefit from this move, the study says Walmart is likely to be the real beneficiary because of the money saved by preventing store overlap (multiple Walmart shops within too close proximity that were actually cannibalizing one another’s foot traffic).
The study acknowledges that there are, certainly, some retailers shuttering shops because of dire straits, like Sears and Kmart, both owned by Transform Holdco, but urges consumers not to lump all store closings into the same narrative.
“To be clear,” the report concludes, “most in the world of retail and retail real estate long ago rejected the idea of a retail apocalypse that would end the dominance of stores in favor of online options. Yet, there was certainly some truth behind the headline-catching terminology….Offline retail, like many other sectors, is being redefined by a new online-offline balance. But the result is anything but a post-apocalyptic scenario, and instead is a reimagined sector that includes new players and prioritizes new strategies. Interestingly, 2020 will likely serve as a critical stage in this transformation that will allow the sectors’ new giants to emerge and establish the defining approaches to success in the 2020s.”