How will the stock market influence the retail industry?

Last updated: 1 June 2023
The stock market fluctuation is taking its toll and affects individual industries and businesses in many different ways. But how will the newest fall of stocks affect the retail business since it’s an industry that is very consumer-oriented?

After Target (TGT)  missed its profit expectations, the whole retail industry is wondering what would be the effect of the stock market on their further work. What kind of connection is there between the stock market and the retail industry? Typically, the stock market is aligned with economic performance. When the stock market is performing well, the economy is growing. This helps businesses feel more confident in investing. Currently, end consumers are not able to afford the rising cost of goods. This is causing a further fall in the stock market. But is there an investment opportunity in this situation too? 

Consumers and bull & bear markets

Consumers tend to spend more during bull markets. This is when they feel financial stability and confidence. That boosts individual businesses by increasing revenue to which they respond with increasing margins. On the other hand, in bear markets, consumers are spending less as the economic climate worsens. Consumers who see a drop in value are likely to spend less. This especially affects businesses that are selling non-necessity goods and services, such as luxury items. This lowers GDP and spending power.

Despite the recent fall, consumer staples tend to hold their own during inflation as demand for these products tends to be inelastic. That's why retail industry stocks are expected to beat inflation over time. 

Is this a good moment for investment? 

Even though many are afraid, retailers still decide to invest during inflationary times. What is the right direction for your business? The answer depends on how long we expect inflation to last, and whether this is a period of rising inflation. There is no doubt that these are challenging times for all businesses regardless of the industry, but it's also a good time for companies to invest in other markets. 

With many companies deciding not to invest, that means that you will have fewer competitors in the newly chosen markets. Even if you only start with the market research, you will have a headstart. What many retailers don't think about is that their products might have bigger success in some other market. 

If you have a quality product, now is the moment for investment because during inflation consumers pay more attention to quality over quantity. 

Lastly, you shouldn't lose out of focus on your long-term business strategy. Inflation is temporary, and your business is forever. That's why you should continue taking concrete actions to grow and expand your business. 

What industries will thrive during inflation? 

Some industries are doing better than before during inflation. Companies that make necessities will always have demand, even during an economic shift. If your business is in one of the following industries, you might want to consider expansion.

Healthcare - as one of the essential businesses, healthcare won't be affected by inflation and stock market fluctuations. 

Food & Beverage - similar to healthcare, food, and beverage is one of the essential industries that is not affected by any economical shifts. 

DIY - this industry will keep on raising because when prices go up, people want to save. In such times, the DIY industry always tends to grow. 

EuroDev - Your boots on the ground in Europe

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