U.S. grocery retail had a disruption of sorts this week, thanks to one firm\u2019s seemingly insatiable appetite to grow. Will it rain discounts for grocery shoppers? What does this mean for supermarkets\u2019 profitability? What should investors be paying attention to? Get the insights in this week\u2019s Steady Investor News\u2026<\/p>\n
After crushing traditional retail stores\u2019 margins with its online discounts, Amazon is brandishing its next trump card \u2013 this time in the brick-and-mortar space. Within just a day of formally owning the organic grocery chain, Whole Foods, Amazon slashed prices of the former\u2019s products by as much as 43%. We wonder what that means for already skinny margins of U.S. grocery retail \u2013 is it headed for a race to the bottom in terms of product prices?<\/p>\n
Grocery has only so much scope of product differentiation, thereby tending to make its consumers price sensitive and its product prices highly competitive. On top of that, Whole Foods\u2019 high-end quality is suddenly coming at bargain prices (thanks to Amazon\u2019s growth-first- margin-later strategy). So, it won\u2019t be a surprise if traditional grocery players feel the heat.<\/p>\n
Will Wal-Mart\u2019s \u2018everyday low prices\u2019 get even lower in response? How far would Kroger stretch its price penetration strategy? Traditional grocery chains could be walking a tightrope \u2013 on one hand, the fear of losing sales to Amazon could push them towards undercutting; but on the other hand, risking already thin margins for a market-share war could leave their shareholders jittery. \u00a0 Nevertheless, a race towards upping the ante on customer experience in some form or the other is expected. Wal-Mart is already doing that on the technology front, having partnered with Google to leverage the latter\u2019s AI expertise for enhancing customer experience in terms of preference-based product suggestions and voice-assistant services.<\/p>\n
Key Takeaway for Investors <\/strong><\/p>\n Increased competition in any sector pushes players toward innovation and evolution. While this evolution brings opportunities for investors, the competition warrants increased selectivity when it comes to investing in the sector \u2013 something which should hold for grocery retail or even retail in general given the recent developments.<\/p>\n No matter how promising, every sector and individual stock is vulnerable to volatility. That\u2019s why, diversification across sectors and asset classes is essential for cushioning downside risks and therefore optimizing returns. A core principle of doing that is included in the \u201cModern Portfolio Theory.\u201d This theory emphasizes that diversification across non-correlated asset classes helps investors increase returns for any given risk level. At Zacks Investment Management, we believe in the tenets of this theory as we build customized asset allocations for every client and chart a financial discipline to follow through. We recommend that you brush up on the main concepts of this very useful theory as it can help investors navigate the markets as conditions start to change. Get all the inside details with our guide, \u201cMaking Sense of Modern Portfolio Theory.\u201d To get your free copy, click on the link below:<\/p>\n <\/p>\n","protected":false},"excerpt":{"rendered":" U.S. grocery retail had a disruption of sorts this week, thanks to one firm\u2019s seemingly insatiable appetite to grow. Will […]<\/p>\n","protected":false},"author":1,"featured_media":7515,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[71,72],"tags":[],"class_list":["post-6784","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-private-client-group","category-steady-investor-news"],"acf":[],"_links":{"self":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/6784","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/comments?post=6784"}],"version-history":[{"count":1,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/6784\/revisions"}],"predecessor-version":[{"id":10952,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/6784\/revisions\/10952"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/"}],"wp:attachment":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/media?parent=6784"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/categories?post=6784"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/tags?post=6784"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}