Several US retailers saw their shares come under heavy selling pressure recently after the firms announced disappointing quarterly results.
For example, Foot Locker, the American sportswear and footwear retailer, lost 28 percent in one day. The share price has more than halved year to date.
The threat from e-commerce sites is the obvious explanation for the poor results of these brick and mortar vendors, but the evolving shopping habits of millennials is probably the root cause.
Smaller living spaces are contributing to a decline in shopping interest in the new generation.
Also, bombarded with too many choices from countless online shops, some people find it hard to make a decision and simply postpone their purchases.
Some of them might adopt minimalism style like Facebook’s founder Mark Zuckerberg, who wears the same gray T-shirt every day.
In this situation, traditional retailers can only survive if they offer highly-fashionable or limited edition high-end products. But very few of them have such capability. Therefore, most retailers are in a bear cycle.
Beer companies are victims too. Millennials aren’t drinking that much beer and the beer industry is losing market share to other types of beverages.
Currently, the Hong Kong and mainland China markets have yet to respond seriously to the changing habits of millennials. But it’s just a matter of time. The lifestyle is set to change given that young people are struggling with skyrocketing home prices and stagnant wages.
Investors may also want to stay away from jewelry plays. Youngsters tend to get married late or simply opt to stay single. That means less demand for gold and jewelry.
Young people tend to spend money on travel. They would rather see the world than owning expensive jewelry.
Against this backdrop, I will stick to sectors that are beneficiaries of the new spending pattern of millennials.
Tencent (00700.HK), for example, is gaining tremendously as people spend more on video games.
The stock market has indeed become increasingly bipolar.
This article appeared in the Hong Kong Economic Journal on Aug 22
Translation by Julie Zhu
[Chinese version 中文版]
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