Ten years ago, thousands of Blockbuster Video stores occupied buildings all over the country, renting DVDs and selling popcorn. Today, all the stores are gone. The company’s shares that once traded for $30 was sold in a bankruptcy auction.
That movie is now playing again with the brick and mortar stores still in existence. Earlier this week, Macy’s announced that it was closing 100 stores nationwide. Target shares plunged on Wednesday this week after it reported poor sales and weak outlook. Walmart, seeing the writing on the wall, is trying to move to an e-commerce model and has chosen to turn itself into food store with more than 50% of its revenues now coming from grocery items. Staples, unable to grow its business organically, tried to merge with Office Depot to stay relevant. And the list goes on.
The one common lament by executives at these companies was Amazon.
Amazon has turned the traditional model of brick and mortar stores on its head by offering online at amazon.com almost all the products people buy from these brick and mortar stores and delivering them to the customers door steps. In the process, the company has obviated the headaches associated with driving to the store, dealing with mall parking, looking for coupons, standing in long return lines etc. The only complaint that customers have with Amazon shopping experience is amount of recycling they have to do with all the empty packaging boxes that Amazon delivers its goods. It is likely that Amazon has put in place plans to take over the recycling function as well by the time this story hits the wires.
The changing demographic of younger internet savvy individuals and families looking to buy, communicate and view entertainment etc. via the internet is a sign of things to come. We believe brick and mortar stores, movie theaters, local bank branches, cable companies, post offices will all become quaint attractions at the local museums in the not too distant future.
Future Wealth LLC
At Future Wealth, we invest in powerful thematic ideas for our clients. Researching intrinsic value of a company instead of chasing latest trends or an outdated asset allocation model is a fundamental shift away from the cookie cutter approach taken by most investment advisory firms.
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