Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche

Grocery Wars

Retail Predictions for 2017

Like 2016, 2017 looks like it will be a very interesting and exciting year in the world of retail. The profound changes that completely disrupted the sector in 2016 will accelerate and have an impact on all of our lives.

Investors, consumers, employees and decision makers on all levels need to be aware of the potential developments in retail for 2017. The industry is being changed beyond recognition and well need to pay attention if we do not want to get taken by surprise.

Here are my Big Retail Predictions for 2017

  1. Amazon (NASDAQ: AMZN) will have another great year as it continues to vacuum up market share. The Everything Store’s revenues grew by $20.98 billion during the first three quarters of 2016; rising from $107.01 billion in December to $127.99 billion in September. If this continues Amazon’s revenue will surpass $130 billion for first quarter 2016 and could potentially exceed $150 billion by January 2018 wow!! This will make Amazon, America’s leading retailer and the dominant force in the business. Among other things it will accelerate the scramble to expand online we’re seeing on the part of other retailers.

  1. Walmart (NYSE: WMT) will have a good year in 2017, particularly online. The world’s largest retailer is one of the few companies with the online infrastructure to go head to head with Amazon and that infrastructure is expanding.’s sales will not match Amazon’s but they will steadily expand throughout the year; particularly if Walmart keeps undercutting Amazon’s prices. One area in which Walmart has an advantage over Amazon is in store pickup of merchandise ordered online. Walmart is already rolling out a number of different pickup concepts, Amazon has just one.


  1. Expansion of the pickup of merchandise ordered online, particularly groceries, will be preoccupation of retailers in 2017. The leaders here will be Walmart, Amazon and Kroger (NYSE: KR). Kroger in particular has more experience with pick and pull; than either Amazon or Kroger but a lower profile. The grocery giant has been experimenting with so-called “pick and pull” for several years. A major problem retailers will face is getting consumers to adopt the practice which; as Kroger’s experience has shown, might be easier said than done. Retailers might have to resort to gimmicks like charging no fee or offering steep discounts to get customers to forgo direct delivery. Something to remember is that it has taken 20 years for online shopping to take off.

  1. Brick and mortar retailers will keep losing market share to online competitors. The big losers will be department stores, clothing stores, specialty retailers such as sporting-goods merchants, electronics stores and niche retailers. A development to watch for is online competition starting to cut into business at discounters like dollar stores, grocers and home improvement stores like Lowe’s (NYSE: LOW). Also hit might be drugstores like Walgreen’s (NASDAQ: WBA) which depend heavily on sales of small easy to ship high-mark up items like toiletries and makeup.


  1. More retailers will close large numbers of stores. Companies that have announced mass closures early in 2017 include department store operators; Macy’s (NYSE: M), and Sears Holdings (NYSE: SHLD). Macy’s has too many stores but so do Kohl’s (NYSE: KSS) and possibly Dillard’s (NYSE: DDS) so more closures at those brands are likely. A strong possibility that Sears will simply shut down Kmart; its money losing discount brand, completely in 2017. One brand to watch is Target (NYSE: TGT) which has been suffering a serious revenue decline that might drive it to start closing some stores. Also expect large numbers of clothing stores close.

  1. Expect to see one or more major department store or supermarket operators declare bankruptcy. The most likely candidate is Sears, but revenue losses are accelerating in the grocery business because of food deflation.


  1. There will be more consolidation in the grocery business as more regional chains sell out to Kroger or Safeway to avoid the death spiral. Surprisingly Kroger got through 2016 without making a major acquisition. Its’ last was Wisconsin-based Roundy’s in November 2015. Therefore expect another major Kroger acquisition in 2017. Regions ripe for Kroger expansion include Florida, Minnesota the Northeast (particularly Pennsylvania, New Jersey and New York) and Texas. Kroger will move into these areas because its’ management would like to expand the footprint in affluent suburbs and urban areas. That includes regions such as New York City, Boston, Miami, Philadelphia, the Twin Cities, New Jersey, Connecticut, Austin and San Antonio.


  1. Expect to see more radical experiments in retail such as expansion of same-day delivery as companies struggle to survive. Companies like Walmart, Target and Kroger will roll out and expand more technology-based solutions.


  1. Giant retailers such as Kroger and Walmart will still reject Apple Pay, Android Pay, Microsoft Wallet, Samsung Pay and other payment apps that employ Near Field Communications (NFC). An interestingly possibility is that Apple or Alphabet will modify their payment solutions to work with quick read (QR) code technology to get into Walmart. Walmart currently offers its own app, Walmart Pay, which uses QR Code. It has also announced intentions to accept Chase Pay which also uses QR code.

  1. Some online retailers might try to discourage the use of delivery in an attempt to reduce costs. A strong possibility is that Walmart will offer special deals to shoppers who chose in-store pickup over delivery.


  1. Walmart might expand its same-day delivery experiments with Uber, Deliv and Lyft to more cities. Other retailers might join in that experiment.


  1. Expect at least one major more online retailer to start accepting cryptocurrency; probably bitcoin, payments. Currently com (NASDAQ: OTSK) is the only big player that accepts bitcoin.

  1. Expect Chase Pay from JPMorgan Chase (NYSE: JPM) to quickly become one of the most popular payment apps if it has a successful rollout. Chase Pay has the nation’s largest bank behind it and some giant retailers including Walmart and Starbucks (NASDAQ: SBUX) are already onboard. Chase Pay; and not Apple Pay, is in a good position to become the industry standard for smartphone payment. Especially if it can combined with blockchain and cryptocurrency technology, Chase is experimenting with Ethereum.


It looks as if 2017 is going to be a very interesting year in the world of retail. Investors had better pay close attention because the entire sector is facing massive disruption.