Analysts Say Coronavirus Hastens Disruption Brought by E-Commerce

Retail stores are boarded up in San Francisco during the coronavirus pandemic. (Getty Images)
Retail stores are boarded up in San Francisco during the coronavirus pandemic. (Getty Images)

The U.S. retail industry appears to stand to lose 11% to 17% of its total store count by 2025, according to a report by Swiss bank and money manager UBS that brokers and analysts say is a sound estimate.

The report sent to clients of UBS’ advisory program last week predicts that in the next five years 100,000 retail stores will close nationwide and that e-commerce’s penetration will rise to 25%, from 15% last year. The number of closed stores could rise as high as 150,000, depending on the speed with which e-commerce cuts into traditional retailers’ domain.

The winners in this scenario are expected to be big companies with sophisticated online operations and logistics networks, including Walmart, Target and Amazon, which are poised to sop up the market share left behind by other retailers going dark.

“Our overarching belief is that the big will get bigger,” UBS analysts wrote in the report obtained by CoStar News. UBS did not immediately respond to a request for comment from CoStar.

Consumers’ embrace of online retail is a long-standing trend but has been accelerated by the spread of coronavirus, or COVID-19, which has led to stay-at-home orders to curb its spread that have halted nonessential business. The crisis has been a boon to Amazon, Walmart and other large players, however, who are able to operate as essential businesses selling groceries and other basic staples.

Abby Corbett, a managing director and senior economist for CoStar Analytics who authored CoStar’s national retail report that came out on Thursday, said the firm’s forecast squares with her own outlook.

“I think it’s quite realistic,” Corbett said in an interview with CoStar News.

She concurred that the virus had sped up adoption of online shopping, and added that it drastically shortened the runway for traditional retailers attempting to adapt to the new order.

Before the coronavirus pandemic, “there was a chance for them to pivot into omnichannel retail or rationalize their store count,” Corbett said. “A lot of these retailers were in a precarious financial position to start with. [The pandemic] cut that timeframe from one to two years down to two months.”

Thorny Problem

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