Investing.com -- The shift of U.S. retail sales to online channels is set to continue but at a slower pace than the surge seen during the pandemic, according to a UBS, which forecasts eCommerce penetration reaching 26% of total retail sales by 2028 from 23% in 2024.
UBS analysts estimate a 6.1% compound annual growth rate (CAGR) in online sales over the next four years, marginally lower than their previous forecast of 6.9%.
While younger consumers increasingly favor online shopping, many shoppers still value in-person experiences, tempering the rate of digital adoption.
"We anticipate online adoption to modestly increase over time, though note the latest survey iteration shows U.S. consumers continue to appreciate the in-person shopping experience," the analysts wrote, citing survey data collected from over 2,300 U.S. adults.
The gradual shift online is expected to result in further store closures, with UBS forecasting brick-and-mortar sales to grow at about 2% annually compared to an overall U.S. retail sales CAGR of 3%.
As margins face pressure, more retailers may shift towards an omni-channel strategy, combining online and offline experiences to retain customers.
Sector-wise, the biggest contributors to the shift by dollar volume are expected to be grocery, home improvement, and apparel & footwear, while under-penetrated categories such as auto parts and sporting goods could see faster online sales growth.
Among companies expected to benefit from rising eCommerce penetration, UBS favors Amazon.com Inc (NASDAQ:AMZN), Walmart (NYSE:WMT) Inc, and Deckers Outdoor Corp (NYSE:DECK).
Conversely, traditional retailers such as Macy’s Inc, Ollie’s Bargain Outlet Holdings Inc, and Simon Property Group Inc (NYSE:SPG) may face challenges as online sales eat into physical store revenue.
UBS noted that its eCommerce penetration model partially relies on the latest survey data, which may reflect temporary shifts in consumer behavior rather than long-term trends.