I was listening to the recent edition of the Economist on the way to work yesterday and was struck by the massive changes happening in the retailing industry. Why the interest in retailing from someone who hates shopping? Blame my early days in 1996-97 as a retailing analyst at a mutual fund company. My job: scout out the leading retailers for investment opportunities. What this meant in practice was meeting company executives and visiting stores for companies like Sears, Wal-Mart, Target, JC Penney, Circuit City (remember them?), Home Depot and Costco.

I gained an appreciation for the competitiveness of the marketplace (Wal-Mart was a behemoth in those days too) and the challenges of managing a low-margin business. Amazon wasn’t even on my radar screen as it started in 1994 and went public about the same time I was leaving the money management business to pursue an entrepreneurial venture. In case you were wondering, the IPO price was about $1.50 (on a split-adjusted basis). Today’s stock price is about $726/share. So had I purchased 1,000 shares on my way out the door for $1,500, that would be worth $726,000 today…but I digress.

Kids love shopping for the most part so I thought this would be an interesting article (click on top article in this Google search) for them to read during your investing unit as they consider the relative merits of investing in Amazon or Wal-Mart (see this activity from Amanda Volz, an NGPF Teacher-Innovator for ideas on how you might operationalize this activity). The article lays out the tectonic shifts happening in retailing. Here are a few they mention:

• Shift to online shopping: “Since April share prices for some of America’s best-known retailers, including Macy’s and Gap, have plunged by more than 25%. Some of their problems are fleeting, but one is not. Rather than driving to a big box, many Americans are shopping online instead. American e-commerce accounted for 10.4% of retail sales last year, up from 9.3% in 2014, according to Morgan Stanley, a bank. Amazon is the force behind this, with sales in North America rising by nearly 30% in 2015. The choice for bricks-and-mortar retailers is clear: evolve or decline.”
  • Ask your students what the they think the future of retailing is based on their behaviors.

• Growth of Amazon which appears poised to overtake Wal-Mart: Picture tells a thousand words about the current trends (isn’t it remarkable to see that one retailer controls 10% of the market for retail sales today!):
  • When do they think these lines will cross? Why?

• As Americans increasingly move their shopping online, what is going to happen to all that retail square footage (we already have twice as much retail square footage per person as Australia)?:
  • As an entrepreneur, how would you think about repurposing all this retail space in malls

As your students dig into the merits of investing in Amazon and Wal-Mart, they will quickly discover that the stock market has very different views on the future prospects of these companies based on their valuations. Enjoy!

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More evidence of the shift to online shopping showed up in this recent UPS survey.

About the Author

Tim Ranzetta

Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.

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