The Changing Retail Landscape#

The U.S. retail sector is poised for significant transformation over the next decade, largely due to the rapid rise of online shopping. A recent report by Bernstein highlights how this trend could reduce the need for many physical stores across the country.

Overstored Market#

Currently, the U.S. has an abundance of retail space, more than any other developed country. Analysts estimate that there are about 24 square feet of retail space per person in the U.S., which is much higher than in countries like Canada, Australia, and the U.K. This excess space may lead to a wave of store closures or repurposing in the coming years.

Impact of E-Commerce#

As online shopping continues to grow, it now accounts for about 17% of all retail sales, a significant increase from just 3% in the early 1990s. This shift puts pressure on traditional brick-and-mortar stores, with Bernstein estimating that between 2 billion and 6 billion square feet of retail space could become unnecessary, equivalent to 15,000 to 40,000 large-format stores.

Repurposing Retail Spaces#

Interestingly, many closed stores are unlikely to stay vacant. Developers are increasingly repurposing these retail properties for various uses, such as gyms, healthcare centers, self-storage units, schools, or even housing. Past studies show that most empty retail spaces eventually find new tenants, often as other retailers or alternative facilities.

The Rise of Dark Stores#

Smaller retail locations may also adapt to the changing landscape by becoming logistics hubs for online shopping. Some stores, especially smaller formats like dollar stores, could be converted into "dark stores," which serve as fulfillment centers for online orders, allowing for quicker delivery.

Resilience of Certain Formats#

Not all retail formats will be equally affected by these changes. According to Bernstein, warehouse clubs and home-improvement chains seem to be more resilient against e-commerce competition, while traditional mass retailers might face greater challenges as online shopping continues to grow.