While reading my local paper this morning, I came across a sales insert for J.C. Penney (JCP) . This insert was just like all other retailing inserts offering sales, promotions and the like. Since I don't shop at J.C. Penney, I automatically toss such items in the recycling bin. Yet as I was doing that, something caught my eye.
The promotions being offered illustrated to me the difficult and desperate environment retailers face and are likely to continue facing. This insert was offering a dress shirt for one penny with the purchase of a regularly priced dress shirt. There was a coupon for $10 off a $25 purchase. It used be that such deals were held until Black Friday, but now such promotions appear to be a year-round occurrence. And yes, retailers are smart: Offering a shirt for one penny is another way of saying "two for the price of one" and other similar gimmicks.
But what caught my attention was the combination of promotions and coupons that, when put together, you start to wonder if its profits retailers.
I am not about to say retailers can no longer outsmart or out-gimmick consumers. They still can. But retailers cannot outsmart the Internet. With the exception of luxury brands, gone are the days of paying full price for anything. I also read an article recently stating that retailers who attempt to sell online in an effort to battle Amazon (AMZN) often lose money once you price in the cost of free shipping that the retailer has to absorb. If you live in a small rural town, it's costly for a retailer to ship to you. (Amazon is part of TheStreet's Growth Seeker portfolio.)
If that wasn't enough, retailers also are battling the Amazon of bricks-and-mortar retailing in TJX (TJX) , which mints money by buying from retailers and then selling for less. Even names like Nordstrom (JWN) , which are perceived as higher end and somewhat insulated from this onslaught, are realizing that might not be the case. (TJX is part of TheStreet's Action Alerts PLUS portfolio.)
Investing is simple, but not easy to do. Sometimes, something that looks cheap may not be, regardless of the scenario. Retailing is certainly not going to disappear off the face of the planet, but if you are going to think about investing in one, focus on the obvious businesslike factors before running cash flow spreadsheets. There's a seismic shift occurring in retailing and that is going to have profound implications on the investment returns of that industry.