Retail company investors should change their stock-picking criteria and industry directors must move even faster than they think to adapt to ecommerce trends.

Retail company investors should change their stock-picking criteria and industry directors must move even faster than they think to adapt to ecommerce trends.

That’s the message from Panmure analyst Philip Dorgan, who published a weighty note on digital disruption this week. He argues that investors must adopt a new mindset similar to shareholders in Amazon. At present, he maintains “short-term profit is irrelevant” and what is important is being in pole position in a decade’s time.

Accordingly, he thinks new valuations are needed that rate profits generated online higher than those from stores, and retailers should switch investment away from stores and into digital operations and cash generation.

The lower profitability typically delivered online unnerves many, but the fact is that it’s the direction of travel and some brave decisions will have to be made by retailers.

However, whether it’s Tesco or John Lewis, there’s evidence that top management teams are confronting the implications of the shift to digital.

Whether traditional retail shareholders will be prepared to take a similar view of their counterparts in Amazon is another matter.

Tesco’s extra weapon

Tesco ratcheted up the pressure on prices with the launch of its Price Promise nationwide after a trial in Northern Ireland.

The inclusion of own brand in the pledge sets it apart from existing initiatives from rivals, and could be a powerful extra weapon in Tesco’s armoury.

Price is almost always central to a retailer’s appeal but it’s notable that the latest offensive comes in the aftermath of the spaghetti bolog-neighs debacle, which prompted debate about whether the drive for ever cheaper food was a factor.

Tesco’s intensified emphasis on price indicates that, despite the scare, many shoppers go for the lowest price first. In the present environment that means little respite from the ferocious fight for every penny among the big grocers.