Daily Management Review

Death Of Brick And Mortar Stores Seems Far Off Yet, Despite Amazon


11/19/2017




Tools that would induce betting for the decline of the brick-and-mortar retail were handed over to the stock market investors just before Black Friday and for the kick-off to holiday season shopping.
 
But these were not up for sale on Amazon as yet.
 
Investors were allowed to bet on the decline of traditional retail by an exchange-traded fund that was launched on Thursday while another can be used to bet for the supremacy of online sales.
 
The Online Short Stores ETF and the Decline of Retail Stores ETF are easy to comprehend. Composed of 64 retailers including Barnes & Noble, Sears, Office Depot, Macy’s and Walmart, that possess both physical chains and has an online presence is the equal-weighted Solactive-ProShares Bricks and Mortar Retail Store Index which the main index tracks inversely.
 
These are however neither first nor the only one that desire the decline and ouster of the retail by the likes of Amazon and other online retailers. Presently made up of 54 components, the Death by Amazon Index was introduced by research firm Bespoke in 2012.
 
The TFFs are hopeful of capitalizing on the long-term positive trend of online retail  because eat present the online channel accounts for only a small fraction of traditional retail even though the trend for rising online sale is nothing new.
 
“Online penetration is about 10 percent right now so there is a long way ahead for the strategy in our opinion,” said Michael Sapir, CEO of ProShare Advisors in Bethesda, Maryland.
 
“A minority of brick and mortar (retailers) will be able to make the transition and it is going to be expensive and painful.”
 
But there might be some exaggeration in the reports about the death of brick and mortar retail.
 
According to U.S. government data, September was a record month for the retail and food service sales in the United States with a total revenue of $484.4 billion while $4.78 trillion is the sale figure for the first three quarters of 2017.
 
According to the National Retail Federation, during the coming Thanksgiving weekend, including on Black Friday and Cyber Monday, plan to shop have been made up by about 164 million Americans.
 
The physical stores are giving a very tough fight when it comes to the battle for consumers. For example, the quarter U.S. sales growth online and in-store for Walmart was its bests since 2009.
 
Survival of what is now known as ‘click and mortar’ – where customers have the option of buying online and then picking up the products form the stores on their drive home is being touted by many.
 
Earlier in the week, Home depot enhanced its forecast for the full year for its profits and sale and its shares as well as those of Walmart reached a record high on Friday.
 
“Walmart is transforming itself into a major competitor of Amazon,” said Chad Morganlander, portfolio manager at Washington Crossing Advisors in Florham Park, New Jersey.
 
“Our belief is there will be some winners on brick and many online retailers will start looking more traditional.”
 
The trend of very small margins for online retail is being countered by those retailers who are in search of a small niche which would help them to keep margins growing.
 
“Unless you know exactly what you’re going to order and it is mass market, you don’t go to Amazon,” said Kim Forrest, senior equity research analyst at Fort Pitt Capital Group in Pittsburgh.
 
“Holiday shopping means meaningful gifts. If you’re a good retailer you can take advantage of that.”
 
(Source:www.reuters.com) 






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