Expecting Short Term Downturn For Online Retailers

I’m a big fan of Amazon.com (AMZN) and shop there on a regular basis. I buy books, games, electronics, and computer related items. It’s a great site, with great service and a great brand. So, with the recent increase in price for shares of Amazon, I wanted to see just how excited I should be about not only shopping there, but purchasing shares of Amazon stock.

In order to get a feel for Amazon, I began my analysis at Alexa.com. At Alexa, I can pull up charts on traffic rankings, page views, and overall reach. I pulled up a 5 year chart for Amazon traffic, and while the overall trend is positive, I’m not too excited about the short term one that is forming. There is a sharp and noticeable downturn after a high peak that occurred at the end of 2006. Here’s a link to Alexa.com and Amazon results.

I wanted to see if this was exclusive to Amazon, so I ran a comparison on Target.com (TGT), Walmart.com (WMT), and Overstock.com (OSTK).

Notice the rise on the chart that begins in 2003, and peaks at the end of 2006. The traffic levels fall off suddenly to levels at or below 2003 marks. Also, the peak tops at the end of each year are becoming successively lower. These chart patterns are very consistent with the recent bull market in equities and the low cost of debt to the US consumer. With gas prices on the rise, the consumer tapped out, and inflationary concerns, it would be a good idea to keep an eye on the retail sector, the consumer, and Amazon.

Comments

[Alan Brochs...:]

That is neat - thanks for sharing. It is hard, though, to ascertain the true implications. If AMZN looked different from other retailers, I would find that to be meaningful. Without a lot of thought, I would offer this hypothesis: the Web itself is growing more rapidly than e-commerce. That says nothing about the growth prospects for retailers but rather the continuing evolution of the web (YouTube, blogging, search, photos etc.). Also, it would seem that international growth of the web could be greater, and I believe that your chart was global. Ebay, by the way, shows a similar trend.

2007 Jun 18 01:03 PM