Retail is everywhere. From discount stores to upscale clothing manufacturers, new stores open all the time, but the industry is also changing all the time and that impacts share prices. Make sure you understand the pros and cons of\u00a0investing in retail stocks\u00a0before you add one to your portfolio.<\/p>\n
Retail as an industry is impacted by the economy. In a recession or economic downturn, people have less money to spend. In a booming economy, people might spend more on discretionary purchases like cellphones or cars than clothing.<\/p>\n
To complicate matters, it might not be just the local economy. With the advent of online shopping, the world is your mall and some domestic brands may have strong sales in another country.<\/p>\n
Then, there is regulation and legislation, such as minimum wage, to consider as well as channel disruption, like a labor strike in the manufacturing, shipping, or distribution of products.<\/p>\n
It all adds up.<\/p>\n
That said, retail companies do have the potential to produce strong returns when everything lines up just right. Plus, retail is a seasonal business, so profits can vary wildly between quarters and then there is the less tangible to consider.<\/p>\n
Customer service comes into play as well as the strength of the brand\u2019s identity and social media presence.<\/p>\n
The successful store or brand needs to forecast trends accurately, not invest too much capital in chasing the market, charge the right price, and deliver a quality product so that returns are minimized.<\/p>\n
It\u2019s a tall order that isn\u2019t so different than hitting a jackpot on a slot machine, and like those sudden winnings, they may not repeat reliably, frequently, or year-to-year.<\/p>\n
Let\u2019s take a look at two key players in the retail industry: Nordstrom (NYSE: JWN<\/a>)<\/strong> and Macy\u2019s (NYSE: M<\/a>)<\/strong>.<\/p>\n Nordstrom (NYSE: JWN<\/a><\/strong>) is keeping its focus on inventory.<\/p>\n The retail chain has integrated its online ordering with its store inventory and vendors so that shoppers can place an order online or in-store and have the item(s) delivered from any of Nordstrom\u2019s locations. This includes stores as well as fulfillment centers and vendors.<\/p>\n It is also focusing on the shopping experience itself.<\/p>\n Nordstrom recently bought\u00a0MessageYes<\/a>, a company that uses artificial intelligence to deliver highly-targeted notifications to customers while they shop online and allows them to purchase the advertised item with a simple \u201cYes\u201d response.<\/p>\nIs Nordstrom Stock Worth Buying?<\/h2>\n