Traditional brick and mortar retail has had a specifically tough few years. Although holiday sales were strong for retailers such as Kohl’s, Macy’s, and Target, companies like L Brands and Nordstrom have faced struggles. Nordstrom has rejected a low private equity buyout offer, despite lower net income and $2.68 billion in long term debt.
This begs the question is there a future in brick and mortar retail? With increasing e-commerce sales and the continual rise of Amazon, it is hard to see growth in the brick and mortar industry. Companies will then need to use decision theory with risk to decide how to move forward. For this companies can factor in different alternatives. These can include whether to spend more on online or in store marketing, whether to spend money on website development or on opening brick and mortar stores, what type of personnel to hire (e-commerce or retail workers). Looking at historical performance and earnings, companies can then project future return on expenditures. To factor in risk companies can look at competitor projects and their successes, success of past expenditures, and industry growth and trends. Decision theory with risk is just one component of decision making but it can allow companies to make solid decisions on strategic planning.
Risk theory is important because although retail has declined in past years, retail has had a strong quarter and is subject to change. Some sectors of retail are doing particularly such as off price retailers such TJX corporation and Ross Stores. These retailers almost exclusively operate brick and mortar stores. The “treasure hunt” process continues to resonate for middle America. Additionally, traditional retailers experiencing positive earnings may indicate that brick and mortar may not be totally out of the question. Increase in retail earnings can be a sign of stability and growth in the overall economy.
What do you think about growth in the retail industry?
How do you think retailers should evaluate processes and projects?
What retails companies or stocks do you follow?