Online sales penetration: What is the future of stores?

The surge in ecommerce sales following the Coronavirus Disease (COVID-19) pandemic-induced 2020–21 lockdowns across Europe was unprecedented and not only marked a rapid acceleration in online sales, but also raised questions regarding the future of brick-and-mortar stores. DBRS Morningstar analysed the implication of the phenomenon on European retailers and made a few observations.

Key highlights include:
-- As social restrictions were gradually lifted, online sales contracted markedly. The surge in online sales seen during the pandemic failed to persist, especially in countries that had lower online penetration rates before the pandemic.
-- Younger generations still prefer visiting and shopping in-stores. Therefore, physical stores remain extremely important for merchandising companies.
-- Retailers prefer variable rents to respond to the decrease in store footfall.

“There is not one-size-fits-all when it comes to omnichannel strategies. Some sectors, such as electronics, for example, and geographies, such as the UK, are more exposed to the online threat than others. Therefore, companies can have limited online presence without this being necessarily detrimental for their credit profile”, according to Edoardo Danieli, Assistant Vice President of European Corporate Credits at DBRS Morningstar.