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If the holiday season did anything for investors, it highlighted an issue that most really prefer to ignore. The retail sector is in trouble. UK stalwarts, like Morrisons (LSE:MRW), Tesco (LSE:TSCO) and Sainsbury (LSE:SBRY) share prices have pulled the London Exchange lower as each reported dismal sales during the season. Because we all see the “brick and mortar,” we think that retail is business as usual. Because we watch the window dressing change, we interpret that as a sign of positive change. Because we live in an era where retail has been king, we expect that is the way it will always be. Well, retail is not king. It is an empire. And the Emperor just got a new set of clothes.
Yesterday, 09 January, Tesco’s share price declined 1.2% and Morrison’s dropped 7.8%, whilst Next slid by 1.9% and Sainsbury followed at 2.4%. Mothercare suffered even more significant results, with its share price plunging by more than 35% since trading reopened on 03 January. All of this is market response to the retailers’ failure to have the holiday sales and profits they had anticipated. It may turn out to be a one-day reaction, but, if it does, then we, like the Emperor, don’t see his new clothes for what they are. Don’t be fooled into thinking that this is a local problem. In the U.S., Bed Bath and Beyond (NASDAQ:BBBY) and Family Dollar (NYSE:FDO) inflicted similar pain on the NASDAQ and the New York Exchange. Retail giant Macy’s (NYSE:M) is about to lay off about 1,500 employees as it closes stores across the U.S.
Mark Fielding, of the Irish Small and Medium Enterprises Association (ISME), is predicting “further job losses in the trade, despite a gradual improvement in the wider economy.” Economist Alan McQuaid said that, “Households are still very nervous about the economic climate and are more willing to save than spend until there is greater clarity about the outlook going forward.”
Are we foolish enough to think that the face of retail is so established that it will never change? I admit that retail is much more stodgy than technology, meaning that it may take retail longer to change, but it will change eventually. The unparalleled advances in technology alone are moving so rapidly that retailers can barely (pun intended) keep up. I expect the odds to begin to favor start-ups that are much more in tune with advancing reality and to do so in a manner that is disruptive to the status quo, if not revolutionary.
Check out the article by highly-respected analyst and CEO of Crowd Companies, Jeremiah Owyang, entitled “Ten Trends for the Progressive Retailer.” If that does not wake you up to a new reality, nothing will. And, if you think its a bunch of hogwash, think again. It’s happening right in front of you and, just like the Emperor’s New Clothes, you can’t see it.
Open your eyes. The retail revolution is about to begin. I’m already planning a column for fifty years from now. I’m entitling it “I Told You So.”
