Even though more and more shoppers are making purchases online, brick-and-mortar is expected to continue to pull in the majority of sales — at least for the next few years.
Despite the growth of e-commerce, which now makes up about 20 percent of total retail sales when excluding areas such as cars, gas and food, Fitch Ratings’ senior director David Silverman said brick-and-mortar retailers shouldn’t think they’re being completely pushed to the curb by shoppers.
“In fact the vast majority of purchases are expected to be made in-person for the foreseeable future,” Silverman said.
While e-commerce is certainly a growing area of retail, he noted it is expected to hit around 30 percent of total retail sales by 2020 and trend there for some time.
“Even if e-commerce demand growth accelerated significantly from current growth rates, distribution infrastructure may not be able to handle increased volumes.”
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Moreover, Silverman said a sizable portion of the gains in e-commerce sales have gone to major retailers such as Wal-Mart and Macy’s, which have been able to leverage their existing brand identity and inventory position to develop a “robust” online business.
When it comes to purchasing products either large in number or in size, bricks-and-mortar stores are also better equipped to serve a customer, considering fulfillment logistics can be more complex for e-tailers.
“These limitations will impact e-commerce growth rates, especially in more logistically challenging areas like grocery and large-scale consumer electronics and home improvement,” Silverman added.
Home improvement stores and food retail are further insulated from significant e-commerce competition due to the simple fact that these products are generally too large or too perishable for shipping to make sense.
While brick-and-mortar retailers may not be disappearing, Silverman admitted that the prospect of more physical stores popping up is “not likely” and pointed to department stores, some of which are embarking on extensive store closure programs.
Silverman also said specialty retailers will continue on a path of fewer stores and less square footage overall, and that the “pace of closures is likely to accelerate over the next few years.”