In 2019, online sales made up around 16% of all retailers sales. This figure is expected to increase to 25% by 2026. This will create new opportunities for companies that have developed robust digital strategies. Those that fail to adapt will be left behind.
We’ve already seen the impact of online sales this year. 9,300 retail locations have closed since January. Payless Shoe Source closed 2,100 stores. Sears, Walgreens, Gap, Foot Locker, and GameStop have all closed more than 100 stores each.
Analysts predict that 75,000 more store closures will occur by 2026. Clothing stores are going to feel it the most, with an expected 20,000 closures in the next five years.
It’s not all bad news. Stores and brands that are embracing online sales are seeing record growth. The two stocks below show that there’s still opportunity for investors.
Nike – A Strong Brand with a Solid Digital Strategy
Nike Inc. (NYSE: NKE) has seen the vulnerability in physical retail, and the company has already implemented its direct-sales model. It now offers its footwear and apparel to customers through its own websites, and its stock is in extremely good shape. While Nike still sees its retail partners as being important for its growth, its key internal focus is on product innovation and the direct-sales model.
In its most recent quarter, Nike increased revenue by 10% and earnings by 32% year over year.
Target – Changing with the Times
Target (NYSE: TGT), like Nike, has adapted to take advantage of a digital sales model. In addition to its standard retail experience, the company offers several digital options. Customers can order online for same-day delivery, in-store pick-up, and drive-up pick-up at select locations.
This model has been extremely popular with digital sales increasing by 32% year over year in the previous quarter. The positive perception of the brand has also strengthened its normal retailers operation.
Look for Innovators When Investing in Retail
Nike and Target are two very good examples of companies that can adapt to changing market conditions. Any investor looking for strong retail picks should consider how consumer trends are evolving. Online sales are the future, and the companies that understand this will gain the most.
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