Value.able: Roger Montgomery
Despite the industry’s big challenges, there are opportunities for the astute investor
Employing nearly 11% of all employed people in Australia, the retail industry is the second largest employer behind healthcare and social services. The retail sector in Australia is made up of almost 140,000 businesses, covering everything from corner convenience stores to big-box hardware and supermarkets.
There is also a great deal of wealth that can be made from retailing. According to
Forbes magazine’s rich list, 221 billionaires in retailing and fashion make up 12% of the worldwide total of billionaires from Home Depot’s Bernard Marcus and Arthur Blank to Aldi’s Beate Heister and Karl Albrecht jnr and Ralph Lauren and Giorgio Armani. Indeed, retailing has produced the second largest number of billionaires after finance and investing.
The one great challenge in retailing is change. Not only do tastes change, requiring adaptation to both the products being sold and the environment and platforms through which they are sold, but competition is intense – sometimes even driving the changes to tastes and preferences. Today, online “disruption” and the emergence of global bricks-andmortar entrants such as Topshop, H&M and Zara are simply the latest changes that the Australian retail sector faces. That challenges are ever present ensures only the very best merchants survive and prosper.
In large part because of deflation – retailers must continue to lower their prices to compete effectively – the retail sector’s share of gross domestic product has been declining. While record low interest rates are providing some cushioning, they won’t stay low forever.
The two most oft-cited variables impacting retail sentiment are interest rates and petrol prices. If the future holds higher interest rates and fuel prices, one would expect retailers will face another challenge beyond their control.
Roger Montgomery is the founder and CIO at The Montgomery Fund. For his book,
Value. Able, see rogermontgomery.com.