Over the past week, we’ve witnessed a host of retail companies deliver knock out earnings reports. This included everything from big box stores such as Target, Home Depot and Wal-mart, to high end and specialty retailers like Nordstrom and William-Sonoma.
Suddenly everyone was repeating the mantra that not only was the death of retail greatly exaggerated but we might actually be entering a ‘golden era.’
For those that have been faithful readers of this site the turn of events shouldn’t have come as surprise and would have already been riding the rebound I shares for the past 18-24 months. Because back in October of 2016, I wrote an article titled Is This a Golden Era for Retail.
In it, I pointed out what retailers needed to do compete with Amazon, what actual advantages their physical locations offered, and which stocks were-best positioned and were taking the necessary actions.
Many of the points are still relevant, making the article worth a reread. Here it is:
A Golden Era for Retail?
Amazon (AMZN) is set to report earnings after the close today and it seems the only question is just how much they will be crushing their brick and mortar competitors. Actually, the way some frame the retailing landscape the word “competitor” should be replaced with “victim” as AMZN just keeps grabbing market share and pushing into new categories threatening the very existence of many businesses.
Indeed the bodies are piling up, with original targets such a book and electronics resulting in bankruptcies of national chains such Borders and Circuit City (to say nothing of numerous independents) and retrenchment of Barnes & Noble (BKS) and Best Buy (BBY) to more recent areas such as athletics, Sport Authority and GolfSmith have shuttered, to pressuring supermarkets and department stores into consolidation.
But two prevalent themes calling for the death of retail might not only be greatly overstated but simply wrong in principle.
- The notion that physical stores and malls are dead may be greatly overstated.
- The belief that the next generation, AKA millennials, are only interested in spending money on ‘experiences’ rather than ‘things’ is misinformed.
In fact according to long time retail analyst expert Jeff Macke, who does a nice job dispelling these notions, retail is actually entering a golden era of opportunity.
Macke breaks down the forces at work and how and who the winners might be in this article.
Let’s start at the conclusion: Millennials are about to blow the world’s mind in the best possible way. The idea of a shut-in nation spending the prime of their personal and professional lives playing video games in mom’s basement is lunacy. Millennials aren’t space aliens. They are the spiritual grandchildren of Baby Boomers with longer life spans and better toys.
Here’s a rough timeline of American life. The sequence is unchanged since about industrial revolution:
The age ranges have drifted later along with life expectancy but the signposts are the same. No one has ever liked their first job. You’re not supposed to. That’s what makes a person upwardly mobile. I wouldn’t want to meet, let alone hire, a 25 year old who didn’t feel underemployed. This isn’t new. In 1985 Minneapolis business icon Harvey Mackay pulled me aside and told me to “Learn in your 20s, earn in your 30s”. The same advice works today, especially if you extend the learning period to your mid-30s.
There’s no magic here. Just demographics and census data.In 1970 the average first time mother was 21 years old. Today she’s 26. The father (co-mother) is generally a couple years older, both in 1970 and today. Kids change everything yet seem to be ignored when it comes to getting our arms around Americans under 35. Whenever you read something like “Young Men Spend 73% of their free time playing video games” ask yourself if this is more likely to be a shocking trend or simply a description of being young and unmarried.
More young people are entering the workforce than anytime since 1982. As old folks will tell you, 1982 was a pretty good time to be buying stocks, despite a bitter recession and looking forward to the 1987 Crash.
Spending all day at home streaming and gaming only sounds relaxing if you don’t have children. Throw a couple 6 year olds in the mix and staying home all day sounds more lie incarceration than a staycation. Malls are cheap ways to kill a day. Movies are great way to experience art with your kids for not much money. There’s a reason malls have existed in some form for thousands of years. They aren’t going anywhere.
Millennials aren’t into consumerism because they don’t have good jobs yet. The lofty aspirations are just cover for bad pay and enviable freedom. The Baby Boomers went from unwashed hippies to yuppy scum ( http://www.bloomberg.com/graphics/2015-drexel-burnham-oral-history/ ) in about 20 years. The Millennials should be able to cut that time in half, once they get started.
Millennials: Let’s talk about your social awareness in 20 years…