A new report by investment firm UBS warns that an estimated 75,000 stores are likely to shut down by 2026.
Analysts said the closures would affect a variety of retailers, including an estimated 21,000 apparel stores, 10,000 consumer electronics stores and 8,000 home furnishing stores.
The reason for the closures can be attributed to the fact that more Americans prefer to shop online. UBS reported that the average U.S. household spent $5,200 online last year, an increase of nearly 50 percent from five years earlier. And the report added that online shopping is expected to make up 25 percent of retail sales, with around 16 percent of overall sales made online.
“This is a healthy cleansing for the retail industry,” said John D. Morris, senior brand apparel analyst for financial services firm D.A. Davidson, according to The Washington Post. “We’re in the middle of a multiyear retail purge. Companies are finding that when it comes to stores, less is more.”
Retailers have closed more than 15,000 stores since 2017, including Radio Shack (1,470 stores), Toys R Us (735 stores), and Mattress Firm and GNC (700 stores each).
“Retailers have been hanging on too long to their brick-and-mortar stores,” Morris added.
In-store sales actually rose in 2018, but those gains will probably be reversed this year, said UBS analysts Jay Sole and Michael Lasser.
“This pace of store productivity improvement is unlikely to be sustained in 2019 as the boost from fiscal stimulus fades,” they wrote in a note to clients. “This will likely lead to an acceleration in physical store closures in the upcoming year.”
And although some online companies — including Wayfair and Casper — have decided to launch their own brick-and-mortar stores, these locations function more as showrooms than fully-stocked retail sites.
“The trend is toward more streamlined stores: Less chaos, less inventory, less choice,” Morris said. “If a customer wants something in a different color or size, they can find that online.”