This retail landscape is not your parents’ retail landscape. Gone are the days of fierce brand loyalty and believing that higher cost means higher quality. Today’s shopper is happily snapping up store brands and always bargain-hunting. This shift means looking at your retail exchange traded funds (ETFs) a little differently.
Three trends in particular are revealing themselves to be forces in the world of retail:
Tepid Spending. Target Corp. (NYSE: TGT), Home Depot Inc. (NYSE: HD) and Macy’s Inc. (NYSE: M) joined other consumer-focused companies in warning that sales gains will continue to slow in the first half of the year, report Miguel Bustillo, Sara Murray and Rachel Dodes for The Wall Street Journal.
Business purchases and other indicators say the economy is improving, but unemployment is still at 9.7%. The Consumer Confidence Index fell to 46.0 in February from 56.5 in January, a 10-month low. Booz & Co. conducted a survey that revealed that only 18% of consumers plan on purchasing clothing and shoes at pre-recession levels in the next year and two-thirds say they are willing to go to other stores for lower prices. [Indicators and Job Reports.]
Retailers are changing their strategy from aggressive expansion to managing conservatively and tightening costs and inventory levels to minimize risk. [Retail ETFs Benefit from Smarter Retailers.]
Out With Brand Names. Large retail stores like Wal-Mart (NYSE: WMT) are seeing shoppers buying less and looking for bargains, and the stores are left with too many types of brand-name products, writes Parija Kavilanz for CNNMoney. Bill Pecoriello, CEO of market research firm ConsumerEdge Research, believes Wal-Mart and other retailers will simplify shelves by taking out several name-brands across categories like household products, toiletries and food staples. What does that mean for name-brand stalwarts like Johnson & Johnson (NYSE: JNJ) and Procter & Gamble (NYSE: PG). To stay competitive, they may have to slash prices or risk becoming obsolete.
Retailers are also threatening to take products of the shelves in an attempt to look for better deals from suppliers on both prices and advertising.
Taking It Online. Internet researcher comScore Inc. (NASDAQ: SCOR) found that total retail e-commerce spending increased by 3% to $39.5 billion in the fourth quarter, but sales for the year decreased $129.8 billion, reports John Kell for The Wall Street Journal. ComScore Chairman Gian Fulgoni believes online retail spending will continue to increase, but warns that high unemployment and consumer shift toward savings will hinder the industry.