Online retailers that offer consumers free returns like ASOS have “clouded the issue of logistics for a lot of mainstream firms like M&S that incorporate returns into their costs,” Adams said.
Also, “M&S has such a large footprint that its ongoing costs are relatively high as opposed to someone just coming into the marketplace.”
Adams thinks that many consumer giants are failing to grasp the real underlying reason companies like Apple, Google and Amazon are successful – they have a better understanding of today’s consumer’s wants and needs.
Many traditional retailers are operating under the notion of “stack fallacy,” said Adams, the “mistaken belief that the higher the layer, the more trivial duties become.”
Developers like Apple and Google have tended to reverse that focus, starting on the top end (i.e. understanding customers’ technological needs) and innovating downwards (developing the tools to meet those needs after the fact).
Adams admitted that it is hard to discern whether the wave of dividend cuts and falling share prices is wholly the result of what he calls the “Amazon effect” and not simply a consequence of a weakened economy.
However, he said it is impossible to ignore the fact that companies focused on the consumer experience have changed the rules of the game, making picking the right stocks a more difficult exercise.
