PSigma warns investors of 'new retail world order'

Added 3rd June 2016

Online retailers have changed the rules of the game for consumer spending, and portfolio managers are struggling to catch up, says PSigma Investment Management.

PSigma warns investors of 'new retail world order'

With BHS and Austin Reed the latest casulties of the high street, Daniel Adams, senior investment analyst, pointed to what many see as a new era of industrial revolution.

Here tech savvy corporates like Google, Facebook and Amazon have turned established business models on their head and have rendered traditional valuation metrics redundant.

The “gravity and pace” of this “technological disruption” has been “quite extraordinary,” said Adams, not least of all because it has precipitated a “colossal structural change” in traditionally profitable consumer sectors.

However, this transformative technological revolution has been more “hugely beneficial to the consumer” than portfolio managers, he asserted.  

As a fund or wealth manager, it is difficult to know how to navigate the waters of this brave new world and how to structure investments in light of this massive “technological disruption,” according to Adams.

The online shopping model has been an obvious game changer in the retail sector, affecting major markets alike across the globe, he said.

“The biggest retailers in the world,” Amazon and Alibaba “now own no stores,” Adams indicated.

“The typical metrics one might use for the retail sector would likely focus on same-store-sales, revenue per square foot and store rollout” which are “irrelevant to the new retail order.”    

And as online retailers like Amazon and ASOS have seen their shares soar in recent months, traditional bricks-and-mortar retailers like M&S and Next in the UK and Macy’s and Gap in the US have noticeably struggled over the same period.

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