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Goldman Sachs: Stores still have a place in the future of retail

E-commerce does not have to kill traditional retail, but companies need to adapt as more consumers shift to online shopping, according to Goldman Sachs analysts.

"The retailer of the future will likely be a retailer of the past — just the most efficient version therein," the analysts wrote in a report published Aug. 2.

About 85% of retail sales are still conducted in physical stores, the analysts said. Goldman Sachs estimates that even if e-commerce maintains its current growth rate, 76% of those sales will still take place in stores five years from now. The report did not specify if those figures refer to the U.S. market specifically, but the rest of the research presented focuses on the American retail industry.

Retailers should pick a side, focusing on in-store experience or hyperefficient logistics models, according to the research. Some retailers, including Target Corp. and Whole Foods Market Inc., are "stuck in the middle." The analysts said Target carries low-priced basics, but with costly store standards. Similarly, Whole Foods has struggled to balance the pricing of its products with the cost required to keep up its stores in upmarket locations.

"From within the group of incumbents, the successful retailer of the future will need to operate either as an optimized logistics machine, an ultra-convenient shopping option or an optimized showroom," the analysts said.

Brick-and-mortar stores have a place in the future of retail, but mostly as showrooms that allow customers to sample inventory, according to Goldman Sachs. Bonobos, the online men's retailer recently acquired by Wal-Mart Stores Inc., has locations called "Guideshops" where customers can try and clothes and "de-risk" variables such as color, size and style. That format is easier for online-native companies than those that have sunk investment in real estate, the analysts said.

"The U.S. retail sector is overstored and out of step in an era of e-commerce," the analysts said. "But retail is not dead; it is changing. How brick-and-mortar stores employ new technologies and models may determine how they survive the relentless shift online."