Future of retail: Key trends and potential winners

Investing.com -- The future of retail over the next decade will be shaped by continued e-commerce growth, rising retail media, geopolitical shifts, and evolving consumer behavior, Bernstein said in a note.

E-commerce ExpansionU.S. e-commerce sales, currently at $1.2 trillion annually or 16% of total retail sales, are expected to rise further. Walmart Inc (NYSE:WMT), Target, and Costco (NASDAQ:COST) are positioned to capture this growth, with WMT seen as the structural winner due to its scale and automation investments. Bernstein noted, “We see WMT as a structural winner, with its scale and investment in automation capabilities supporting further improvement in profitability.” TGT’s smaller scale limits its growth potential, while COST remains selective in e-commerce investments.

Retail Media BoomRetail media could become a $100 billion business by 2028, with WMT leading the charge. Bernstein estimates WMT’s retail media business could grow to $10 billion from $4.4 billion today, leveraging its vast consumer data to drive targeted advertising. TGT and COST also have opportunities, though their narrower third-party assortments present limitations.

AI and Deglobalization RisksThe rise of AI agents could disrupt retail media in the long term, but Bernstein believes physical retail will remain relevant, with scale acting as a critical defense. Additionally, potential changes to global trade policies, particularly if former President Trump returns to office, could impact supply chains. Dollar Tree (NASDAQ:DLTR) and Target are most exposed due to their higher discretionary product mix.

DIY ResurgenceDIY home improvement, which lost share to “do it for me” during COVID-19, may see a rebound. High home prices, a possible labor supply crunch, and increased access to DIY instruction could drive Millennial and Gen-Z homeowners toward DIY, benefiting Lowe’s (NYSE:LOW) and Home Depot (NYSE:HD).

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