Friday, May 20, 2016

Is Amazon The Only Reason for Retailer's Low Sales

Amazon Retailer
In the last few days, Macy's, Kohl's, Nordstrom and JC Penney were among biggest retailers whose stock prices plummeted in the wake of weaker-than-expected sales and earnings reports.

The most obvious explanation for falling sales was the rise of online retailers like Amazon, which offer cheaper and more convenient shopping experiences. But this shift in shopping behavior doesn't sufficiently explain what has been a lackluster apparel spending environment.

"Macy's executives were 'scratching their heads' over last quarter's poor results," Deutsche Bank’s Stuart Kirk wrote last 13 May. "Nordstrom’s shoppers were also laying low. Investor panic has spread to JC Penney and Kohl's. What if people don’t want clothes anymore?!"

Of course, people want clothes. But if their clothes aren't tattered beyond the point of wearability, consumers need a reason to go shopping. In apparel, there needs to be a major shift in trends.

"We think a lack of compelling fashion is a material headwind: sales jumped 4.5 percent in 2012 on the back of the colored denim craze but have since dropped back to 1.0-1.6% growth over the past three years," Deutsche Bank apparel analyst Paul Trussell said in an April note to clients.

"While we acknowledge fashion green shoots with positive commentary from some of our retailers, we remain concerned that there is no clear replacement for the skinny jean, a trend that has grown long in the tooth, which we think is necessary for a new silhouette to emerge and inspire women to refresh their closets," Trussel added.

Internet retail will continue to be the top threat to brick-and-mortar retail in the near-term. But as companies scramble to compete, they can't forget that the most important thing is to develop and sell clothes that consumers want.

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