Retail stock

Quick definition

Updated: Jan 24, 2022

A retail stock is a stock of a company that sells retail merchandise to consumers. 

Key details

  • A retail stock is a stock of a company that sells retail goods – things that people want but do not always need – to consumers online and/or in a store
  • Retail stocks are part of a highly volatile industry that is dependent on changing consumer demographic and taste
  • Retail investors frequently use sector rotation as an investment strategy to make the most of their retail stocks

What is a retail stock?

A retail stock is a stock of a company that sells retail goods to consumers online and/or in a store. Retail goods are things that people want but do not always need. The following businesses are typically associated with the retail sector:

  • Clothes 
  • Department stores
  • E-commerce internet platforms
  • Home goods and furnishings
  • Auto parts
  • Computers and other technological devices
  • Distributors

Investors can count on retail as a resilient sector that is unfazed by business cycles – people shop regardless of the state of the economy. However retail stocks tend to be more volatile because they are entirely reliant on consumer demographic and taste.

Investment strategy for retail stocks

Sector rotation is an investment strategy used by investors to make the most of retail stocks in their portfolios. The strategy is to move your money in stocks from one industry to another as you anticipate which industry will be more stable than another in the next economic cycle – i.e. put money into retail stocks when the market is bullish and move that money into more stable industries when the market is bearish. 

This is relatively easy to do as the economy moves in a reasonably predictable pattern of boom to bust and back again. Certain sectors thrive or suffer depending on the stage of the economy. Investors should anticipate the boom stage in order to invest in retail stocks using sector rotation – retail thrives during the boom when expansionary policies boost consumer demand.

Where can I learn more?

For more information about retail stocks, and other key financial concepts, check out our full course page. Our various courses cover everything you need to know about stocks and investing

Sources & references
Risk disclaimer
Srijani Chatterjee
Financial Writer
Srijani is the quintessential Third Culture Kid having grown up in India, Singapore, Malaysia, The Netherlands, Scotland, and England. She still loves to travel and speaks… read more.