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I’m not one to beat a dead horse, but I do believe that one should stay on topic until at least some people ”get it” before moving on. My article, “Retail Wearing the Emperor’s New Clothes,” was published by ADVFN just a few days ago, on Friday, 10 January. In it I pointed out that slumping sales and subsequent declining share prices of traditional retailers like Tesco (LSE:TSCO), Sainsbury (LSE:SBRY), Morrisons (LSE:MRW), Bed Bath and Beyond (NASDAQ:BBBY) and Family Dollar (NYSE:FDO) is a sign that the online revolution has begun in earnest. Today, I want to look at the other side of the coin.
Let’s consider some of the success stories of online retailers and traditional retailers who understand that the coming change cannot be denied. KPMG’s head of Retail, David McCorquodale observed that “The winners this Christmas were those retailers with slick, multi-channel operations who could offer consumers the flexibility to shop how and when they wanted to.” McCorquodale was summarizing the findings of the British Retail Consortium survey that was conducted by KPMG.
Online sales experienced a 19.2% growth over December 2012. That comes after an 18.4% in December 2012 over December 2011. It does not take a rocket scientist to see that there is a continuing acceleration in the growth of online sales. Plus, there is nothing to indicate that this growth is going to stop. Right now, in the middle of January, all else being equal, I’m going to make a bold prediction that the growth of online sales in December 2014 will be even more dramatic, as more and more consumers can do comparison shopping and ordering from their mobile devices. When online selling originated, the one catch was that you had to order from home. Now, it is possible to shop for whatever you want from wherever you are.
The BRC survey reported that 18.9% of all non-food purchases in December were made online. That’s nearly one in every five purchases. McCorquodale said that, “Whilst store sales continue to flatline, online sales remain the main driver of growth for the sector, contributing nearly three quarters of the uptick in non-food sales in the last quarter of 2013.”
Best of the Best (LSE:BEST) like-for-like in-store sales increased by 12.9% during the six-month period ending 31 October 2013. During the same time frame, the company’s online sales increased 22.5%, now accounting for more than 40% of the company’s sales revenues. Online sales during the last calendar quarter of 2013 exceeded 47%, almost half of its entire business. Discussion of the company’s online strategy and results accounts for eight entire paragraphs of their six-month report. In those eight paragraphs it is abundantly clear that BEST understands that success with online retail is not about just cobbling together a website. It’s much more. It’s about leveraging every online element that has the potential to draw customers from multiple segments and even personalizing the online experience beyond what in-store employees are typically able or willing to do.
I don’t know about all of the other retailers, but I believe that Tesco (LSE:TSCO) is latching on to the power of cyber-retail. CEO Philip Clarke reported regarding the Christmas sales season that “UK online sales were up 14% in just those six weeks; with three million online grocery orders, up 11%; and 1.5 million online general merchandise orders, up 25%.”
Here’s the bottom line. If you are going to invest in retail, or if you are already invested in retail, you had better investigate the online strategy of the institutions you are funding and from which you are expecting to generate wealth. It could make a huge difference in your portfolio.
