DID YOU SAY RETAIL WAS DEAD?
Someone once told me retail is dead...
The amount of cynicism around retail over the last two years has been extraordinary. I understand the mindset as CNBC and other news outlets did hype the demise of poorly managed retailers, coupled with continued discussions around the "Amazon Effect".
The combination of inadequate operations and elevated debt created the issues at hand. In my view online was not the culprit, but the accelerant to exposing defective businesses.
Amazon is the ultimate final exam in college. They move industry to industry testing the status quo.
Some pass the test such as
Smartphones (Firephone flop)
Music streaming (Amazon Music flop)
Local Business (Amazon Local flop)
and some get checked
Smart speakers (Echo)
Data storage and management (AWS)
While the retail story has mostly been around the Amazon tsunami taking over retail, little is shared about the successful checks of the incumbents.
The chart below highlights the same-store sales of some of the largest retailers in the world. The main takeaway is that Target, Wal-Mart and Costco are seeing mid single digit comparable sales growth.
Wal-Mart, which sells anything and everything, has made substantial efforts to meet the customer where they want to be met. Also, Wal-Mart has made serious attempts to introduce innovation to the organization through the acquisition of Bonobos, Jet.com, and some others.
Target has been a sitting duck as it has struggled to showcase its true value proposition versus Amazon's online business, and Wal-Mart's low price large assortment business. Target has focused on bringing exclusive and private label brands, and infusing their apparel with fresher items. This model has shown up positively in their same-store sales.
Costco has been in a league of its own as it has created a community around its customers through the use of a membership program. Also, Costco focuses on bulk products which are great for families and businesses. Bulk purchasing benefits both parties as it reduces the cost per unit for customers, but also increases the average basket size for Costco. Costco same-store sales hit 7% this last quarter.
Here's the chart.
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Sean D. Emory
Avory & Co. Founder & Chief Investment Officer
Disclaimer: This is not a recommendation for purchase or sale of any securities. This not a recommendation of any of the companies listed above. Invest at your own risk.
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