UBS analysts forecast 80,000 small stores closures over the next five years, as the COVID-19 acceleration in e-commerce forces retailers to shrink their fleet of bricks-and-mortar locations.
That will bring the total number of stores in the U.S. to 797,000, down from 878,000.
UBS also forecasts that e-commerce penetration will reach 27% by 2026, up from 18% in 2020.
“Yet, our analysis also presumes that retailers evolve and adapt their store formats to be the centerpiece of interacting with consumers, including fulfilling online orders,” analysts led by Michael Lasser wrote in the report.
UBS says e-commerce fulfillment from stores will rise to 20% in 2026 from 10% in 2020.
“Overall, under this framework, every 100 basis-point increase in online penetration results in the equivalent sales of 8,000 stores shifting to e-commerce,” the report said.
“Going forward, we think retailers best positioned to adapt their store formats or levered to categories with less disruption from the shift online will be best positioned.”
UBS says retailers in the apparel, consumer electronics and home furnishings could see the most stores shuttered, with clothing seeing the most closures at 21,000.
Stores specializing in home improvement, grocery stores and auto parts stores will see minimal impact.
The potential decline in retail could pose a significant challenge in a changing economic landscape, shifting jobs toward online fulfillment centers and putting pressure on the value of commercial real estate.
The analysis assumes that online penetration will grow from its current 18 percent to 27 percent by 2026, meaning the shift to online shopping would accelerate considerably even as the pandemic continues.
To be sure, some companies are opening up new stores, particularly discount chains.Dollar General said last month that it may open 17,000 new stores in the future. Dollar Tree (DLTR), Burlington Stores (BURL), Five Below (FIVE), TJ Maxx, Aldi and others also plan to open new locations.