| INTEGRATIVE INSIGHTS ON EMERGING OPPORTUNITIES |
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dgearhart@firstanalysis.com
- The rise of e-commerce has come at the expense of traditional retail. E-commerce, along with COVID-19 and several other factors, is likely to push traditional retail location closures to 20,000 to 25,000 in 2020, leaving retailers and landlords with a large and growing amount of empty retail space.
- A portion of this space is being repurposed for e-commerce, creating opportunity for technology vendors that enable these businesses. These include companies providing warehouse and order management software, artificial intelligence software for inventory forecasting, allocation and restocking, hardware and software for automated warehouses, and kiosks.
- We explore the trend to repurpose physical stores for e-commerce and highlight some specific technology companies likely to profit from this tailwind.
TABLE OF CONTENTS
Includes discussion of AMZN, ECOM, HD, JWN, SHOP, STMP, TGT, WMT and ten private companies
Vacant retail space growing and needs to be absorbed
The case and potential for converting physical stores to e-commerce fulfillment centers
An ongoing evolution
First Analysis e-commerce stock index leveling after huge gains
E-commerce optimization M&A rebounds in Q3
E-commerce optimization Q3 private placements near high of past two years
Vacant retail space growing and needs to be absorbed
The rise of e-commerce has come at the expense of traditional retail, with online sales now accounting for over 16% of total retail sales. It's well known that several major traditional retailers have been driven into bankruptcy or forced to close locations as a result and that the COVID-19 pandemic has accelerated this trend by making shopping in physical stores unsafe. In hindsight, headwinds were inevitable for brick-and-mortar retail due to years of overbuilding and expansion: U.S. retail square footage per person increased by more than 50% from 1970 to 2016. And despite many store closings in recent years, including more than 9,000 in 2019, the United States is still over-indexed to physical retail with retail space per person about five times the level in Europe (PwC) and much more than the level in most countries (see Table 1). All these factors are likely to push retail location closures to 20,000 to 25,000 in 2020, according to Coresight Research, leaving retailers and landlords with a huge and growing amount of retail capacity.