Retail's Last Hurrah Against Amazon

Jun. 23, 2017 4:37 AM ETBBY, COST, DG, GPS, HHC, CPPRQ, JWN, KR, KSS, BBWI, M, OLLI, ROST, SHLDQ, TJX, WMT, AMZN10 Comments
Elk Grove Investor profile picture
Elk Grove Investor
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Summary

  • Online shopping is a $395 billion industry, but it's only about 8% of total retail sales in the U.S.
  • Amazon is the 800-pound gorilla in online retailing. 20% of U.S. online sales flow through Amazon.
  • Retail's last hurrah against Amazon is figuring out a way to compete on price.

Prologue

Note: Data last updated as of June 22, 2017.

A record 8,640 stores are closing in 2017. Retail is dead! Everyone will shop online. Those are the news headlines nowadays. The question is, do the headlines support the data?

There is a shift towards online shopping. This secular trend is led by Amazon (AMZN) with visionary leader Jeff Bezos. Amazon's customer-centric business model is forcing a price war. It's hard to compete when Amazon doesn't care about profits, at least for now. The obvious winners are customers.

We benefit from lower prices and better shopping experiences.

Behind the headline numbers, the data shows retailing isn't dying. It's actually growing. What retail is experiencing is a shift in market share. Customers' tastes and preferences change with the times. Before, customers wanted reputable brands and quality customer services. Many retailers have replicated those desires. Nowadays, customers want great bargains and unique shopping experiences.

There are retailers who failed to adapt their business models to accommodate customers' wants and needs. The numbers show up in their financials. It's not just Amazon that's doing well. Other retailers are thriving because they have business models focused on finding bargains and experiential shopping. However, investors are pricing Amazon's stock as if it's going to take over the world. That could be the case. Retail is a very large industry; it's about $5 trillion in the United States alone. With growth comes competition, and Amazon's growth might give other retailers a fighting chance.

The Retail Landscape

The Bird's-Eye View

Retail is a large, fragmented, and booming industry. It's about $5 trillion in the U.S. alone, and growing.

Also, retail is a very resilient industry. Growth only turned negative twice since 1992 mainly due to the Great Recession in 2008. The U.S. consumer continues to spend even with all the political

This article was written by

Elk Grove Investor profile picture
151 Followers
Hello there. This blog serves as a place to journal my investment thoughts. I invest in stocks and real estate. You can expect to read things about value investing since I am a big Warren Buffet and Peter Lynch groupie. Quick bio: - Bachelor’s in civil engineering and minor in communications from UC Davis - Former buy-side analyst at a single-family office - Currently working as a research analyst in public sectorStay frosty and happy investing. Cheers.

Disclosure: I am/we are long HOME, DLTH, HHC. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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