As you all know the world of retail is presently living in the house of pain. Last week I had a long conversation with my cousin who works for a big retailer in the home improvement space. That section of the market has been facing the full brunt of the soft housing market so I wanted to get news from the frontline. My cousin was rather glum about the outlook and believes this is just the tip of the iceberg for retail and the economy at large. While I respect his opinion and that of George Soros, at least for the retail market, I believe this contraction is a blessing in disguise.
Think about it, what does Macy’s actually do? Well, they buy products manufactured by underpaid people in third world locations. They focus on in store displays, marketing and CEO pay and leave the rest to consumers who, up until now, we happy to just buy. Basically, most profits generated through production efficiencies and global arbitrage are not trickling down to product innovation. What we have at stores are mediocre products being sold by mediocre salespeople. The correction in the retail sector will essentially bubble up good retailers, so I think this is a good trend.
At the end of the day every retailer should understand they serve customers by introducing and guiding them to the best possible products at reasonable prices.
Orvis has nothing to fear.