Why consumers hold all the power when it comes to the retail market

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June 19, 2019 3:08pm NYSE:XRT

NYSE:XRT | News, Ratings, and Charts

From Lauren Thomas: In an ongoing power struggle between consumers and retailers, shoppers are winning.

Consumers are “very nuanced in their expectations,” Ron Johnson, the former CEO of J.C. Penney and the former senior vice president of Apple‘s retail division, said at CNBC’s Evolve Conference on Wednesday in New York. Johnson now is the CEO of Enjoy, a company that’s helping retailers build out mobile stores.

Shoppers are “responding clearly to innovative new business models,” he said. They like newness. And “the tolerance for a bad experience has gone to zero.” As a retailer, “you’ve got to be great every time,” Johnson told the audience.

Increasingly, shoppers are able to go directly to brands to buy instead of visiting department stores. And so chains like Penney are struggling and shutting stores, as consumers put their dollars toward their favorite brands. In picking their favorites, they may be won over by experiences like a yoga class offered by Lululemon, or by the millennial friendly marketing from luggage start-up Away.

“I think it’s better to be a consumer today in a lot of categories,” than it was a decade ago, said Jeff Raider, who co-founded both glasses maker Warby Parker and men’s care company Harry’s. Both businesses have disrupted the categories they operate in, and Harry’s is now slated to be combined with Schick owner Edgewell.

In many cases, these retail companies are innovating on behalf of people, Raider said.

“Ten years ago I had to wait outside for a cab in the rain,” he added. Now, Uberand Lyft are available.

“We see consumers really driven by ease,” said Susan Tynan, the founder and CEO of framing start-up Framebridge.

She explained people are looking for a seamless shopping experience. And she said that’s one reason why Framebridge, which started online in 2014, recently opened its first two bricks-and-mortar stores in the U.S. She said basket sizes are up 50% when people visit a Framebridge store instead of shopping online.

Also, in search of new brands or stores to buy from, more and more shoppers discover companies through social media, she said. “They can learn from others … their friends.”

The SPDR S&P Retail ETF (XRT) was trading at $42.23 per share on Wednesday afternoon, down $0.19 (-0.45%). Year-to-date, XRT has declined -6.26%, versus a 10.05% rise in the benchmark S&P 500 index during the same period.

XRT currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #4 of 41 ETFs in the Consumer-Focused ETFs category.

This article is brought to you courtesy of CNBC.

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