retail news in context, analysis with attitude

The Associated Press has a piece about how changing American shopping habits became "evident during the pivotal holiday shopping season, a time roughly from November through December when many retailers can make up to 40% of their annual revenue. Overall, government figures show that spending during October through December rose at the fastest clip in three years … Online shopping rose 10% to $46.5 billion in November and December, according to research firm Comscore. Meanwhile, sales at stores rose just 2.7% to $265.9 billion, according to ShopperTrak, which tracks data at 40,000 stores in the U.S. And the number of customers in stores dropped 14.6%."

What's interesting is that at least partly as a result, Walmart has said that it expects disappointing Q4 results. "On Friday, the world's largest retailer said its fiscal fourth-quarter and full-year adjusted earnings from continuing operations may come in at or slightly below the low end of its prior forecasts." (Walmart also is experiencing problems linked to a decrease in federal Supplemental Nutrition Assistance Program benefits, which affected low-income shoppers who shop at its stores.)"

Amazon is having the opposite problem … but a problem nonetheless. "Amazon said late Thursday that its profit and revenue both grew in the latest quarter," the AP writes. "Still, the world's largest online retailer said its results fell below what Wall Street was expecting as costs rose in tandem with revenue. But Amazon faces different problems than its bricks-and-mortar peers. Amazon's results were hurt because its costs are rising along with its meteoric revenue growth."
KC's View:
When I read stories like these, I'm always intrigued by the suggestion that some of the analysts seem to think that the cake is fully baked, and that they can now judge whether it is any good or not.

It seems to me that that cake is far from being fully baked. Not only that, companies like Amazon and Walmart are still trying to figure out the recipe. They've got some of it figured out, but the market keeps changing, consumer tastes keep shifting, technology keeps improving, and hitting home runs (if I can change my metaphor) is never easy. Sure, Walmart had a tough quarter and will have more of them, but I'm not sure I'm willing to suggest (as some headlines have suggested) that this is a company in permanent decline. And absolutely, Amazon has been profit-challenged because of its approach to the business, but history suggests that it will figure things out.

I even think it is risky to suggest that the consumer shifts inherent in the numbers are permanent, because nothing is permanent these days … there is only constant change.

In the end, I'd put my money on the companies that are most willing to disrupt their business model from within, and are most able to adjust to changing consumer tastes because they have more actionable information about their shoppers and then actually act on it. Some of those companies will be bricks-and-mortar retailers, and some will be e-commerce companies … but all of them will have clearly defined and evolving differential advantages.