How You Can Add Retail To Your Portfolio Now
Zacks Investment Research | Nov 13, 2014 02:52AM ET
The retail industry has been forced to keep pace with the evolving consumer buying habits. Consumers today are knowledgeable, more inquisitive and choosier. Importantly, today’s customers have numerous shopping options at their disposal like in-store, online, mobile, social media and so on, that influence their purchasing decision. Satisfying customers and enriching their buying experience require new strategies. Modern retailing, interestingly enough, is a new game with new rules.
The U.S. retail and food services sales data for Sep 2014 was up from last year but was marginally below the previous month. According to the U.S. Census Bureau, retail and food services sales rose 4.3% year over year while declining 0.3% sequentially to $442.7 billion.
Some of the trends that are expected to rule the retail sector going forward include increased technological solutions, incorporating customer feedback and targeting additional audiences with products and services.
Omni-channel Retailing the New Norm: The sluggish U.S. economy along with persistent weakness in Europe motivated retailers to focus on the buyers’ needs and lure them with innovative products, attractive discounts, free shipping and the ease of shopping through smartphones and tablets. However, as these efforts failed to pay off, retailers felt the need for a better channel to connect with customers.
This gave rise to the “omnichannel” approach, which focuses on providing more touch points and multiple channels to customers. This approach facilitates the use of all possible mediums to engage consumers, including brick and mortar stores, online and mobile at the same time or alternatively.
This strategy provides customers with the ease of selecting, purchasing and exchanging a product through multiple channels. For example, a customer may select a product online, buy it through phone and exchange the same at a store without any hassle. Some retailers who are already benefiting from this strategy include Staples Inc. , Macy's Inc, Nordstrom Inc and Chicos FAS Inc (NYSE:CHS).
Personalized In-Store Experience: With evolution to the .com era and advancement of consumers, retailers are working hard to reinvent their marketing style, gradually shifting from the mass advertising and promotion format to a more personalized method to impress today’s omni-channel customers. The consumers today seek a more direct communication and hence prefer to interact with an executive through their smartphone app or to chat with them on the company’s website. Moreover, the customers prefer tailored offers and recommendations online as well as in stores.
Increasing Use of Mobile Wallet Technology: With everything in retail undergoing a sea change, the modes of payment used when shopping have also evolved drastically. The increasing use of smartphones, tablets and mobile technology has given rise to a new mobile application called ‘mobile wallet,’ through which customers can be make payments instantly by using their smartphones or tablets. Though cash and credit cards will remain the primary payment methods, the use of mobile wallet is catching up quickly among mobile users for the convenience it offers.
Get The News You Want
The popularity of this app among customers is driving retailers to adapt this payment mode by collaborating with some of the mobile wallet providers available in the market like PayPal, Google Wallet, Square Wallet, Dwolla and more.
In a recent stride in this direction, leading car rental company Avis Budget Group Inc. (Avis Budget Group Inc (NASDAQ:CAR)) fused its express rental service “Avis Preferred” with the Google Wallet application. Moreover, the PayPal app has gained recognition with a wide array of retailers including Abercrombie & Fitch Co. (NYSE:ANF), Advance Auto Parts Inc. (NYSE:AAP), Aeropostale Inc. (NYSE:ARO), American Eagle Outfitters Inc. (NYSE:AEO), Barnes & Noble Inc. (NYSE:BKS, Foot Locker Inc (NYSE:FL), JC Penney Company Inc Holding (NYSE:JCP) and Office Depot Inc (NASDAQ:ODP).
Technology-Friendly Brick & Mortar Stores: With shoppers increasingly becoming tech savvy, the brick and mortar stores need to leave their old-fashioned layouts behind and improvise by adopting innovative in-store technologies. The simplest way to execute this is the implementation of in-store mobile devices, through which customers can make payments, see product demonstrations, gather information and connect to social networks.
This has been well demonstrated by Apple Inc. ( ).
Bottom Line
Retailers are trying to remain competitive primarily by shifting focus to the long-term horizon and finding innovative solutions to create value, reduce operating costs and mitigate risks throughout the enterprise.
Right-sizing inventories, enhancing efficiency and competence while bringing in technological advancements are the key agendas that retailers are focusing on. Moreover, cost-containment efforts and merchandise initiatives to improve margins are top priorities.
Retail, owing to its huge spectrum, remains a lucrative investment avenue for investors. But the changing landscape wouldn’t kind to all operators and/or concepts. It will require flawless execution on the part of management teams to stay relevant in this day and age. The industry hasn’t done much in terms of stock price performance this year and the trend will likely remain in place some more.
As you can see, there are plenty of reasons to be optimistic about the retail industry over the long term. But what about investing in the space right now?
Check out our latest Retail Industry Outlook here for more on the current state of affairs in this market from an earnings perspective, and how the trend is looking for this important sector of the economy now.
Original post
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.