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Market Insight

Door automation and the retail apocalypse

November 05, 2019

David Gonzalez David Gonzalez Research Analyst, Access Control & Fire

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The door automation market, which includes equipment such as sliding doors, was estimated to be worth over $7 billion in 2018. The retail industry was the second largest end user of door automation products, and the market for these products is rapidly evolving thanks to the rise of e-commerce.

North American brick-and-mortar retail stores are filing for bankruptcy at an alarming rate.

Retailers have closed more than 15,000 stores in the US since 2017, and it is estimated that as many as 12,000 stores will close in 2019. By the year 2026, about 75,000 stores will shut down across North America. These changes are in part due to the rise of e-commerce. In 2018, 14.3% of retail sales were credited to e-commerce, up from 12.9% in 2017, and it is estimated that one-fourth of total retail sales will be attributed to e-commerce in 2026.

The over-expansion of shopping malls and the change in consumer spending habits are creating this “retail apocalypse”.

Over-expansion: In 1970, there were only 300 enclosed shopping malls in the United States. In 2017, this number had grown to 1,211, which represents a 303% increase. The over-expansion of malls from the late 1990s and early 2000s caused a retail bubble. Consumers increasingly shop online, and this trend is decreasing mall foot traffic. As a result, approximately 20-25% of American malls will close from 2017 to 2022.

Changes in consumer habits: Consumers have increasingly moved their spending habits online thanks to the rise of e-commerce sites like Amazon. E-commerce as a percentage of total retail sales is set to rise from 14.3% to 25% by 2026. In 2018 alone, Amazon captured $35 billion in retail sales across the United States. Of all retail stores, the clothing market has been most effected by the retail apocalypse. Clothing stores are projected to take the hardest hit, closing about 17% of their physical locations in the United States by 2026.

Door automation suppliers are moving away from retail and into other industries.

As a result of the retail apocalypse, the opportunities for door manufacturers in the retail industry are shrinking, and manufacturers are migrating away from the retail industry and toward more promising end-user segments. The airport and the hospital & healthcare industries have been the most common targets of these manufacturers. The market for door automation products in the airport and the hospital & healthcare industries has been growing faster than all other end-user industries. The compound annual growth rate (CAGR) for door automation equipment in airports is estimated to be around 6.5% through 2023, and the hospital & healthcare industry is expected to grow at a CAGR of 5.9%. Both industries are attractive for manufacturers because the number and scale of airport and hospital & healthcare construction projects are growing.

Competition is intensifying as more door automation manufacturers enter the airport and hospital & healthcare markets. Industry overcrowding has caused average selling prices for door automation products to decline, and this trend is expected to continue through 2023. Average selling prices (ASPs) for complete sliding doors, which are commonly used in the airport and hospital & healthcare industries, are projected to decrease at a CAGR of -2.5%.

The American industrial doors retail market will benefit from these industry changes.

The market for door automation equipment in the retail industry can be divided into two categories: pedestrian equipment, which refers to regular building entrance doors, and industrial equipment, which refers to equipment used in production centers and back building cargo stations. The pedestrian market is suffering due to the retail apocalypse as shopping malls and individual stores continue to close. The American market for door automation products in the retail industry is shown in the graph below. IHS Markit forecasts that pedestrian door automation revenues in the retail industry will have a negative CAGR of -1.4% in the Americas from 2018 to 2023.

However, the outlook is quite different for the industrial door automation equipment. The growth of e-commerce has increased the demand for distribution centers. Global retail e-commerce sales are forecast to more than double between 2018 and 2023, surpassing $6.5 trillion annually. This market boom represents an opportunity for door automation equipment manufacturers to expand sales to industrial distribution centers as they grow. IHS Markit forecasts that the automatic door industrial retail industry will have a CAGR of 1.8% in the Americas over the next five years.

Door automation manufacturers are shifting focus away from the pedestrian retail market.

Door automation manufacturers are losing revenues in a shrinking pedestrian retail market, but they are finding opportunities in different end-user industries and e-commerce distribution facilities.

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