Who Will Steer Retail Sector In 2018: AMZN, WMT Or TGT?

2017 has undoubtedly been a tough year for the retailers, who struggled to maintain good business due to changing preferences and habits of consumers. The year saw an outbreak of online shopping fervor, which almost put the existence of traditional and department store retailers in question. Increased promotions, price wars, lower store and mall traffic, brick-and-mortar store closures, strengthening of online and omni-channel portals were some of the common trends witnessed through the year.

Additionally, the retail sector saw some renowned retailers file bankruptcy, including small mom-and-pop stores as well as major retailers. Some names on the list were Toys R Us, Payless Shoes, Gymboree and Rue21. A major reason behind the demise of these stores was the absence of online presence as consumers today prefer to use smartphones and tablets to shop, instead of spending time in a brick-and-mortar outlet.

Hence, the winners in today’s market are those taking strides to boost online presence through investments in enhancement of digital and mobile offerings, alongside improving product acceptance. Further, retailers are adopting various initiatives to improve omni-channel capabilities. Through these initiatives retailers are not only enhancing online business but also reviving the importance of physical stores. Some omni-channel capabilities that were successful in 2017 include “Buy Online, Pick-Up In Store”, “Ship from Store”, “Find-in-Store”, “Reserve-in-Store”, “Order in Store”, “Reserve Online and Try In-Store”, “Buy Online, Return In Store”, “Click and Collect” and same-day delivery services.

Further, retailers have been taking steps to enhance the capacities of distribution centers to improve deliveries of goods purchased online. Retailers gaining from the roll out if these capabilities and improved distribution centers include The Gap Inc. (NYSE:GPS) , Nordstrom Inc. (NYSE:JWN) , Macy’s Inc. (NYSE:M) , Decker’s Outdoor Corporation (NYSE:DECK) , among others.

Retailers’ omni-channel strategies were more prominent this holiday season, when retailers came up with interesting offers to lure customers. Apart from early-hour store openings, huge discounts, promotional strategies, free shipping on online purchases, price match guarantee and enticing gift ideas were some offers shoppers could not resist this holiday season. This, along with a strengthening economy and a stable labor market, led to a successful holiday season for retailers in long time.

Looking ahead, we anticipate the optimism from the holiday fest to continue in 2018, as retailers’ omni-channel efforts will continue to lure shoppers. That said, we are here to analyze some of the retailers and their enticing strategies, which have the ability to hook up customers through the New Year.

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Retailers Poised to Steer the Sector’s Growth in 2018

On top of the list is e-retailing giant, Amazon.com Inc. (NASDAQ:AMZN) . The popularity that the company has garnered in recent years is unprecedented. The company’s technological expertise is the mantra for its ability to provide a seamless shopping experience. Its user-friendly app and website, impressive product assortment, constant innovations, along with seamless payment and checkout system have helped it to become consumers’ favorite shopping destination.

Amazon’s retail business is nearly unbeatable on grounds of price, choice, and convenience with the help of a solid loyalty system in Prime and its FBA strategy. The company continues to push advantages exclusively to Prime members, consequently encouraging them to spend more on Amazon. Further, the company’s strategy of gradually merging online and offline retail looks promising. The company’s online and offline feature, added to its bookstores has gained significant popularity in recent times. Moreover, the company is taking this forward with innovations such as drive-in-grocery delivery service (AmazonFresh Pickup - order groceries online and collect them from a store nearby) and “cashier-less” stores (Amazon Go – the company’s first brick-and mortar grocery store).

These strategies are likely to fend off competition arising from traditional retailers building their e-commerce businesses as well as other e-retailing counterparts. Further, the company is continually expanding offerings through acquisitions and pacts with leading brands. The company’s recent takeover of grocery retailer, Whole Foods Market Inc (NASDAQ:WFM).; and agreement with Nike Inc. (NYSE:NKE) to directly sell products on Amazon.com, are examples of its expansion strategy.

Driven by these efforts, the company recorded 25% growth in net sales, which came in at roughly $38 billion in the second quarter of 2017. When most retailers are struggling to boost their top lines, this Zacks Rank #3 (Hold) company’s growth is a clear indication of how well it poised to capture the lion’s share.

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