Despite the challenging economic conditions in recent years, investment into certain industries has still been strong. However, one of the areas where investment has been lacking to a noticeable degree has been the retail industry. The big problem with retail is that you can’t look at the industry’s problems and put them all down to the financial downturn. In fact, it is probably fair to say that you cannot blame the financial downturn for the woes of retail at all.
Yes, there are plenty of people who do blame it, and point to the fact that people have less money and are seeking out better prices for the products they buy, but people were always going to get smarter in a world where prices usually increase quicker than wages do, making the real terms cost of living increase almost on a year on year basis.
Why aren’t investors looking at retail?
No Growth
The retail industry is in such a trough that even the biggest companies and supermarkets are struggling to hit their profit targets. Yes, profits are still being made by many companies, but the first thing an investor wants to see before they put their money into a firm is the opportunity for growth.
There isn’t much point in putting a large sum of capital into a business only to get the exact same sum back in seven years’ time. Inflation means you’ll effectively be worse off!
Asset managers like ACPI can’t turn around to their clients with any credibility and say they’ve invested in retail given what is happening to the industry, or what isn’t happening, from a growth perspective.
Retail’s Track Record of Damaging Investors
In recent years there have been numerous examples of retailers who have failed in countries around the world. In several cases, as well as the name of the company themselves being seen as a failure, any firms that have been invested in them have also been affected, even if they literally only put the money in and then had no further involvement.
If you were running an investment company, why would you put yourself in a position where the actions of someone else could damage your entire brand? The retail industry chews up investment groups and individuals and spits them out, reputation ruined. Why would anyone sign up to that?
Administrators Don’t Help
Whenever a business goes into administration, the first thing that happens is we see a press release or they hold a news conference to discuss their plan for the company. Saving as many jobs as possible and preserving as much of the business for sale to a keen buyer are the two main objectives listed.
However, they then go and make buying seem like the most unattractive thing in the world, by saying things like major changes need to be made and the current set up of the business is unsustainable. Why would anyone, let alone an investment group, pay a higher price for something that will need a significant cash injection and time commitment to sort out, when they can wait for the liquidators to come in and pick up business assets and rights at a fraction of the price?
Angus Lovatt is a business analyst who spends a lot of time looking at the future of the retail industry. As more business moves online, he is concerned that not enough businesses are doing enough to protect their bricks and mortar stores for the future.
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