Will Chains Extend Their Retail Dominance Over the Next Five Years?

The strong get stronger and the weak close their shops and go home.

That’s one of the takeaways from a new UBS report covered by Business Insider, CNBC, Forbes and other media outlets.

The report points to 40,000 stores shuttered by small retailers over the past decade and chains adding 17,000 over the same period. That trend is expected to continue as major players in the dollar, discount, home improvement and mass channels continue to grow store counts. Digital natives with brands such as Warby Parker, Vuori and others are also expected to add to their store counts.

UBS forecasts that somewhere between 40,000 and 50,000 stores will close in the U.S. by 2028, down from its previous forecast of 80,000 locations. UBS places the total number of stores, excluding gas, at around 880,000. The financial services fund based its projections on four percent annual growth.

The financial services firm expects retailers selling clothing and accessories, consumer electronics and home furnishings to take the biggest hit, with 23,500 stores closing by 2026.

Stores bounced back from the early days of the novel coronavirus pandemic when many were shuttered due to lockdowns leading some to proclaim that a retail apocalypse (the death of stores) was coming.

The reality is that stores have become more critical to retail operations. Aggressive operators took advantage of cheap rents brought about by the pandemic to open new locations with a shorter path to profitability.

Retailers have also made stores central to their fulfillment of online orders through pickup and store-to-door delivery operations. Target, in many ways the poster child for the store-centric ops model, fulfills more than 95 percent of its online orders from local stores. UBS expects online sales to grow to 26 percent of total retail sales, up from 20 percent.

Dollar store chains and discounters will continue to add stores as they have for years. Digital natives with brands such as Warby Parker, Vuori and others are also expected to add to their store counts.