Could these retail stocks be set to thrive?

Or are we facing dozens of zombie malls?

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Earlier this year Marc Andreessen, Netscape's founder and a successful tech investor, stated, "the bricks and mortar retail guys are going to go out of business and ecommerce will become the place everyone buys" and "retail stores are a fundamentally implausible economic structure if there's a viable alternative".

Wow! These are full on comments and for sure there are major hurdles with physical stores, especially excessive leasing costs. But can virtual shopping really replace the experience of tangible products, social activity and the ability to easily compare and choose? Depends on the product, I suppose.

It can equally be argued that online technology helps provide an extra dimension to physical stores and vice versa. We have seen this with the recent physical presence of Topshop and Zara, not to mention the impending arrival of H&M and Uniqlo. These brands are more of an endorsement of bricks and mortar than a threat, and are mainly focused on a particular segment (fast fashion) of the market.

Of ASX-listed stocks, which are best placed to benefit from the changes in retail?

Department stores David Jones (ASX: DJS) and Myer (ASX: MYR) have sufficient financial capacity and scale to put vigorous efforts into effectively integrating the online and offline experience (multi-channelling). In my view, David Jones beats Myer here as it has half the number of physical stores to support and stronger leverage to the benefits of a successful multi-channel strategy..

Oroton (ASX: ORL) is interesting as it was a relatively early adapter of digital channels and now derives over 10% of sales revenues online. Oroton is currently in the process of establishing a dedicated Chinese site and a major revamp of the home site. Unfortunately, I recommended Oroton as a good buy some weeks back only to see the price fall another 15%. Sorry to anyone who might have taken notice! I still believe the market has underrated the joint venture with Brooks Brothers and the prospects of further developments.

RCG Corporation (ASX: RCG) is also well placed and is growing strongly in the footwear segment. RCG holds an exclusive long-term licence (fee-free, 249-year term) for Athlete's Foot and distribution rights for Merrell, Sperry Top-Sider, Caterpillar, Cushe and Chaco. RCG blends an active online presence with physical stores particularly well.

Premier Investments (ASX: PMV) has a fully owned portfolio of brands and is the one most affected by the arrival of new international entrants. However two rapidly rising stars in the portfolio are Peter Alexander and Smiggle and these are the ones most likely to provide overall growth in the next few years. Premier Investments is digital savvy and should benefit from increasing consumer awareness.

Foolish takeaway

In my view, retail is getting set for a financial revival over the next few years. The new entrants are likely to stimulate rather than constrict opportunities. Retailers adept at balancing the digital with the physical will benefit from lower overall costs per sale and an increase in productivity as marketing becomes better directed.

Discover The Motley Fool's favourite income idea for 2013-2014 in our brand-new, FREE research report, including a full investment analysis! Simply click here for your FREE copy of "The Motley Fool's Top Dividend Stock for 2013-2014."

More reading

Motley Fool contributor Peter Andersen owns shares in David Jones, Oroton and Premier Investments

More on ⏸️ Investing

A white and black robot in the form of a human being stands in front of a green graphic holding a laptop and discussing robotics and automation ASX shares
Technology Shares

Joining the revolution: How I'd invest in ASX AI shares right now

Advances in artificial intelligence (AI) could usher in a new industrial revolution. Here’s how you can invest in it.

Read more »

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »