3. Companies which have invested heavily in IT and logistics will present value opportunities
By Niall Gallagher, investment director, European equities
The vexing climate for retailers as a whole has meant potential winners from the structural shifts have been tarred with the same indiscriminate retail brush as the losers.
This has unfairly penalised farsighted companies that have invested heavily into IT and logistics capabilities to match their inventory seamlessly to meet the consumer wherever they are shopping – whether online or offline.
Inditex, best-known for its Zara brand, is one such example, with its integrated approach to stores – providing consumers with myriad choices – such as buying online, collecting in store and returning to store – all while still maintaining a mid-teens operating margin level in a sector that is barely breaking even.
Zalando, a pure-play online retailer, is currently future-proofing its business model by becoming a platform that can enable retailers to access their own stranded inventory, to service the platform's 26 million-strong customer base in a manner of their choosing.
What these two companies have in common is a problem of inventory – too much, too little, not the right kind or not in the right place.
Inditex's solution to this is to take a holistic view of its inventory and to mix an art-and-science approach to effectively match its offer with demand. This involves liaising with individual store managers who feed upwards their views on local fashion tastes/demand and top-down proprietary algorithms that allocate stock to stores.