Worried About Bankruptcies? Avoid This Surprising Sector

If you’re worried about bankruptcies, be sure to avoid cinemas, cannabis, and grocery retail. “Whoa, whoa, whoa,” some of you may think. “Grocery retail is in the same bucket as movie theatre and cannabis businesses?”

Anyone who has read any of my previous work over the past couple of years knows my thoughts on the long-term future of the mass cinema/movie theatre business. (Hint: I think Cineplex will be a zero within five years).

Many also know my thoughts on the Canadian cannabis industry. I think most small producers will go bankrupt or be acquired within the next two years. However, lumping grocery retail in with these obviously distressed sectors with little in the way of real, long-term, secular growth catalysts may seem nuts. (By the way, cannabis is a commodity like corn or wheat. Cannabis does not have a secular growth trend).

Let me explain.

Innovation during tough times

This tragic coronavirus pandemic has resulted in a very real, negative societal and economic shock. I cannot underscore this enough. However, as with many terrible tragedies, we can often find a silver lining at the end of a very painful road.

For example, Henry Ford was spurred by the Great Depression to innovate car manufacturing nearly 100 years ago. Therefore, innovation may be jumpstarted again as a means to get us out of the darkness in this case.

Our grocery retail system is coming under scrutiny. More consumers than ever have either begun to consider using or have full-out switched to e-commerce as a replacement to traditional grocery shopping at brick-and-mortar locations.

Here’s my bold prediction: retailers that do not heavily invest in e-commerce today will go bankrupt in the next decade. Alternatively, they will be acquired. The industry will aggressively consolidate into a consortium of retailers who meet the needs of tech-savvy shoppers.

The role of e-commerce

I’m not going to predict precisely which retailers may or may not go under. However, I do know that razor-thin margins of grocery retailers will only hurt them long term. This is especially true in light of the cost-reduction function that technology has played in nearly every sector penetrated by the likes of Amazon.com.

One day, e-commerce retailers will likely have food delivered to your door in almost the same time as it would take to do a round trip shopping foray to your local Loblaw. When e-commerce is able to charge the same price or less as big-box stores, these businesses will be in trouble.

Bottom line

These changes aren’t going to happen overnight. But it does bother me that Canadian retailers aren’t meaningfully invested in growing their e-commerce presence to the same extent as American, Chinese, and British retailers.

Canadian retail needs to adapt or face the fate of the BlackBerry smartphone. Something better will come along, and Canadian consumers won’t care that the company or product isn’t Canadian. They’ll just reach for the product (or platform) that’s better.

Stay Foolish, my friends.

5 TSX Stocks for Building Wealth After 50

BRAND NEW! For a limited time, The Motley Fool Canada is giving away an urgent new investment report outlining our 5 favourite stocks for investors over 50.

So if you’re looking to get your finances on track and you’re in or near retirement – we’ve got you covered!

You’re invited. Simply click the link below to discover all 5 shares we’re expressly recommending for INVESTORS 50 and OVER. To scoop up your FREE copy, simply click the link below right now. But you will want to hurry – this free report is available for a brief time only.

Click Here For Your Free Report!

More reading

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. David Gardner owns shares of Amazon. The Motley Fool owns shares of and recommends Amazon and recommends the following options: short January 2022 $1940 calls on Amazon and long January 2022 $1920 calls on Amazon. Fool contributor Chris MacDonald does not have ownership in any stocks mentioned in this article.

The post Worried About Bankruptcies? Avoid This Surprising Sector appeared first on The Motley Fool Canada.

Source: The Fool
Worried About Bankruptcies? Avoid This Surprising Sector
The Fool

The Motley Fool
Contributor for investorsnews.ca
The Motley Fool is dedicated to helping the world invest — better. Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, mutual funds, and premium investing services.

In all we do, we take a different approach.

We believe – and have proven over decades – that the individual investor can beat the market.

We believe that anyone can do it, even if they don’t have a lot of time or money to devote to investing.

We believe in a long-term outlook, helping people build wealth over time.

We believe that the person best positioned to take care of your financial future is you.

And we work tirelessly on behalf of our hundreds of thousands of members who are enjoying the opportunities that come with having enough money to do the things that matter to them.

While we are headquartered in Alexandria, Va., The Motley Fool advocates for the individual investor around the globe with offices in the UK, Australia, Canada, Singapore, and Germany.

Related posts