So far, 2016 has been a mixed bag of economic reports. One day you hear doom and gloom, and the next is all reports of new jobs and record stock trading. Really, this is just the up and down nature of economics, and the slow recovery from the second worst recession in history only complicates matters.
You have probably heard on the news over the last few years how poorly retailers have been doing across the country, and you may have even shied away from investing in them completely. Well, the trends of 2016 have a lot to say about how you should feel about retail.
Major Retail Chains
The big trend that you have probably heard on repeat is the state of major chains. Across the board, they are losing money. What started with a few classic brands slowly losing ground is now an outright destruction of traditional retail. In the last five years, almost every major chain has downsized significantly. Even the titanic Wal-Mart hasn’t escaped the troubles.
Several big global changes have contributed to the current state of the global giants. Investments in China over the past decade have been nothing short of staggering, and they are all starting to turn flat as the economy slowly slips into uncontrollable freefall. European investments are also facing struggles with Brexit signaling major trade changes across the continent.
In short, the old models for retail don’t cut it anymore. Modest sales bolstered by a big holiday season isn’t enough to cover costs for the biggest names in the business.
Online Dominance
As the traditional stores continue to suffer, online retailers like Amazon are pushing success to new limits, and it isn’t just the established brands that are thriving.
Online sales have become so prolific that they now account for 30 percent of sales even for the major brick and mortar chains, and even major online stores like Amazon are building in-person shopping locations across the country.
Ultimately, online retail is tapping into the shopping trends of the millennial generation. As easy as it has been to pick on the demographic for all of their quirky preferences, they actually now outnumber the boomers in terms of pure population, and since the oldest of them are starting to hit their 30s, they are taking increasing shares of professional jobs.
Every year more of America’s wealth is siphoning to the millennials, so catering to their trends will only be more important for the next two decades.
The Small Retail Renaissance
In the wake of so many large chains downsizing, local stores have swept in to pick up their share of sales. Smaller stores are thriving, even though only a few years ago they were considered doomed for extinction. Since 2014, 190,000 new storefronts have opened and 90 percent of them are small businesses.
Their success hinges on a few key factors. First, the vast majority of Americans are now living in urban population centers, and that shift is only going to become more extreme. This helps small stores because the large populations are able to support specialized shopping. Most of the little brick and mortar locations that are doing so well appeal to niche markets.
The second big thing is that smaller stores have much more freedom to engage in social media marketing, which is now the most efficient form of advertising.
Finally, the atmosphere of these retailers is entirely geared towards a consumer experience, rather than just providing goods. They embrace online competition and mobile shopping, and the results have vaulted this portion of the retail industry to bring in more than $5 trillion in 2015.
A Look Towards the Future
Right now retail overall is in a very good place. Spending is way up, and Americans are making more money than ever before.
Many other positive economic factors are making it easier for the masses to justify a little extra spending, so there is expansive room for growth in retail, but without major change, the giants of old will fall to the more adaptable stores that are starting to seamlessly integrate online and in-person shopping.
The demographic shifts and changes to technology have finally produced a major change of course in retail. The key to success now hinges mostly on one simple concept: mobile shopping. Young shoppers are always connected to their favorite stores via their smartphones, so retailers who make the most of this with streamlined apps and engaging social marketing will be reaping the biggest profits.
The volatile situation means that savvy investors should carefully consider how much they pour into retail, considering it a higher risk avenue with big potential.
Regards,
Ethan Warrick
Editor
Wealth Authority
