Good article and an example of how the market consensus can be full of crap. Last year many were talking about how Amazon was "taking over the world". Now, the tide is changing and they are talking about how brick and mortar retailers are back in. What are they smoking?!
The crowd followed those who projected the demise of bricks and mortar retailing. There will always be retailers "going away". Why? Some have just plain lost their way. Toys R Us was weak and then destroyed by private equity's greediness in over leveraging companies to squeeze every last drop of profitability. Bon Ton was just stuck in the middle with no real market presence. Southeastern Grocers is weakly defined in their market. Radio Shack had great stuff, but sold way overpriced goods. All industries have shakeout periods where ineffective companies close their doors.
Often forgotten is that each action creates a reaction. This is called the secondary effect. In essence, if you punch me, I'll punch you back. Many investors just look at the first punch and determine the outcome of the fight without thinking about what the reaction will be from their competitors. There will always be a reaction. Some companies don't have the strategic management capabilities to execute when they are under fire, but others will be tenacious in their reactions.
I find it interesting how Amazon is now getting into the bricks and mortar business. Isn’t that full circle? They have driven prices down and helped expedite the demise of weak retailers. Sounds like econ 101 to me.
Walmart is hitting back hard. Costco has established a strong presence. Ross Stores has a well-defined niche. There are still some very strong players in the retail bricks and mortar industry.
There will always be “babies who get thrown out with the bathwater”. Those moments are ripe for stepping away from “crowd think”. That is when there are bargains to be had, but you must distance yourself from the thundering herd!
