Retailers have an opportunity with the influx of mobile and digital options.

Fitch Ratings said the battle for customers will rage on next year as retailers push their business models to meet the new desires of shoppers and the digital channel wins most of the growth.

The debt watchdog said 2017 U.S. retail sales, excluding automobiles and gasoline, would grow 3 to 4 percent, carrying on the trend seen this year, when sales are projected to end up 3.8 percent.

But the growth is not all equal.

“More than half of retail sales growth will occur online, while in-store sales growth is limited to around 1 percent,” Fitch said.

The report noted that overall square footage growth is minimal and that many categories have seen an increase in competition.

David Silverman, senior director of U.S. Corporates at Fitch, said: “Spending focus on services and experiences appears here to stay, so the dividing line between best-in-class retailers and market share donors is increasingly going to be determined by which retailers can cater to the evolving landscape. Those that find success have invested in the omnichannel model and have differentiated their products and customer service to draw customers in.”

This echoes the sentiment of Howard Schultz, chairman and outgoing chief executive officer of Starbucks, who pointed to sweeping changes in retail, even as the coffee chain moves ahead with plans to open 12,000 new doors.

“We’re going to see a very major downturn in the fact that the country is over-retailed in lots of categories,” Schultz told investors this month. “We are going to see significant, major brands as we’ve seen already, not open as many stores as they have in the past. And you’re beginning to see the beginning of lots of companies announce store closures because they’re fixed assets in terms of their infrastructure and their investment just can’t justify the return.”

He said retailers would have to embrace technology and become true destinations shoppers.

Fitch in its analysis noted: “Customers are shifting discretionary spending away from physical products and toward services and experiences such as media, travel, dining out and fitness. This evolution is generally negative across the brick-and-mortar retail sector.”

Additionally, the rating agency noted, “Customers are dividing spending within categories to the low- and high-end of the spectrum. This is due to quality improvements at the lower end and reduction in the stigma of shopping cheap, coupled with the aspirational importance of high-end brands.”

Dollar Tree Inc., Burlington Stores Inc., Levi Strauss & Co., Coach Inc. and J.C. Penney Co. Inc. are among the company’s that Fitch sees as “on a positive trajectory.”

On the flip side, those companies that “will be challenged to maintain share, liquidity and positive comps” included Sears Holdings Corp., Claire’s Stores Inc., Gymboree Corp., Abercrombie & Fitch Co., Vince Holding Corp. and Bon-Ton Stores Inc.