money The death of brick-and-mortar is 'extraordinarily exaggerated,' analyst argues
Although e-commerce has expanded massively over the past decade, that doesn't mean the end is yet in sight for brick-and-mortar stores, one analyst argued.
"It's extraordinarily exaggerated," Morning Consult Retail & E-commerce Analyst Claire Tassin told Yahoo Finance Live (video above). "The vast majority — about 85% — of retail in the U.S. happens in physical stores. More stores in 2021 opened than closed."
More than 4,000 stores have opened in the U.S. this year, more than twice as many than those that have closed, according to Coresight Research data, building on last year’s trend. The retail sector reported 36% more openings in 2021 versus 2020, with discount stores leading the momentum and accounting for 39% of the total stores opened.
Data has indicated that shoppers still prefer feeling and seeing products in person before making their purchases. According to Morning Consult's semi-annual State of Retail & E-Commerce report, more than two-thirds of consumers prefer shopping in stores for home furnishings and appliances as well as beauty and personal care products. Meanwhile, only one-third prefers shopping online for apparel, shoes, and accessories.
A recent Mastercard SpendingPulse survey showed in-store sales continue to rise, climbing 11.1% year-over-year in July and up 13.9% from 2019. On the other hand, e-commerce sales grew at a slower pace than total retail sales in the second quarter. Commerce Department data showed a 6.8% rise in e-commerce spending from a year ago versus shoppers spending 7.2% more overall.
That's translated to retailers making expansion plans, with companies like Dollar Tree (DLTR), Five Below (FIVE), and Dollar General (DG) among those aiming to open new locations across the country.
Tassin stated that the misconception of brick-and-mortar's doom has more to do with empty storefronts, which are more driven by retailers adapting to the current economic environment, rather than declining sales.
"The U.S. has a real legacy of excessive retail square footage," she said. "I know I see it here in my hometown in Chicago, where you're seeing there's maybe some empty storefronts, but a lot of that is just retailers finding the right space to be closer to their customers and understanding how shoppers are using stores differently than they used to. So, for example, prioritizing some of that square footage for click and collect fulfillment."
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Seana Smith is an anchor with Yahoo Finance. Follow her on Twitter at @SeanaNSmith.
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