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Retailers and Restaurants: Future Winners and Losers

Updated from March 9

In the spirit of "The Future of Financial Services" and "Future Financial Winners and Losers," let's look at two important core consumer segments -- retail shopping and eating out -- and see how they might change over the next year or so.

Here are three trends which you should expect to emerge or continue to evolve.

1. Consumers Are Keeping It Simple

For many years there has been a trend of trading up. Consumers were using their spending power to buy more expensive goods and shop or dine at higher end establishments. Companies such as Nordstrom (JWM), Coach (COH) and Tiffany (TIF) saw a rise in sales. These companies extrapolated that trend and began to expand. Not only did they expand but they began to erect palatial and even opulent stores.

For example, have you ever been to a Cheesecake Factory (CAKE)? Their restaurants are decorated with expensive granite, marble, carved wood and fancy lighting. The wait for a table was long, the menus were reasonably priced and the portions were large. I do not see how Cheesecake Factory can support its huge overhead with its business model in the current economic environment.

So, out with the high end and fancy and in with the low-end and simple.

There has already been a massive shift of spending from the high- and the mid-range retailers and restaurants down to the lower cost names. In retail, we are seeing discounters, such as Wal-Mart (WMT) (WMT), Big Lots (BIG) and Family Dollar Store (FDO), gain sales and market share as consumers trade down.

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