A question worth ~$8T – how much of US Retail sales will end up online?
COVID-19 has accelerated the shift to online in 2020 and we expect further disruption going forward. To answer how much this can affect hundreds of US stocks worth ~$8T, this report leverages our previous Q-Series and this year's US eCommerce survey. UBS built an interactive eCommerce penetration model based on 7 years of proprietary survey data from UBS Evidence Lab. Based on this analysis, we now forecast online share will reach 31% of US Retail sales by 2024 vs. our prior Q-Series forecast of 20% by 2022 and up from 14% in 2019. This ongoing shift implies eCommerce gains 340 bps of share annually. Our new forecast entails eCommerce sales rising at a 12% 5-yr. CAGR versus our previous Q-Series estimate of 11%.
COVID-19 accelerated eCommerce penetration, but stores still have a place:
Our work suggests brick and mortar sales can marginally grow (less than 1% annually), assuming overall US retail sales rise at 3%. Thus, we think there could be more retail store closures. One of the enduring outcomes of COVID-19 is that it inspired broader digital adoption, especially in older age cohorts. However, consumers indicated they still shop in stores (i) to see and try products and (ii) because they enjoy the experience.
UBS Evidence Lab market research and data science analysis power our views:
UBS Evidence Lab surveyed 2,500 US adults age 18+ regarding online and offline shopping habits by category. The survey has been administered annually since 2014, with questions kept consistent in order to provide y/y comparisons. We then leveraged data science techniques to build detailed penetration models for each retail category. We acknowledge the math for how we formulate eCommerce penetration heavily relies on the most recent survey data. This data point was attained during a pandemic, when behaviors may differ from a steady state or normalized behavior, potentially influencing the long run forecast from the data science team.
What sectors and stocks are best positioned? Who has most to lose?
Our interactive model suggests grocery, apparel & footwear, and home improvement are likely the three biggest contributors to the shift by dollar volume. We forecast faster online adoption in under-penetrated categories (groceries, household products and personal care).