According to investors in the retail sector, the Amazon hurricane will not destroy all of its rivals.
Among potential competitors of the e-commerce giant founded by Jeff Bezos, there are some promising companies that can withstand Amazon. The list of strongest online retailers contains such brands as RossStores, AutoZone, Home Depot, etc.
All of them in the market are conferred on valuations commensurate with, or better than, the one accorded to Amazon.
The “child” of J.Bezos has already done a lot of damage on the classical retail landscape. And that will intensify as the $450 billion titan completes its $13.7 billion purchase of Whole Foods this month.
Amazon.com Inc. spent its first day as the owner of a brick-and-mortar grocery chain cutting prices at Whole Foods Market as much as 43 per cent.
The tech giant’s $13.7 billion purchase of Whole Foods has sent shock waves through the already changing $800 billion supermarket industry. The wedding between Amazon and the grocery promises to raise the way customers shop for food and drinks.
According to Bloomberg, cutting prices at the chain with such an entrenched reputation for high cost that its nickname is Whole Paycheck is a sign that Amazon is serious about taking on competitors such as Wal-Mart Stores Inc., Kroger Co. and Costco Wholesale Corp.
Seems like Amazon has serious ambitions on entering all segments of retail world but there are still some space to expand. Talking only about e-commerce sales, in the second quarter of 2017 it made up $111 billion, or 9 per cent, of total retail sales tallying $1.3 trillion in the, according to the U.S. Census Bureau. In that same time period, Amazon notched $22 billion in North American revenue, suggesting there is possibility to take more money.
But economists and investors have doubts about unconditional success of Amazon strategy. Neither media nor stakeholders believe that the purchase of Whole Foods will help Amazon to overpower retail world – they value the retail behemoth’s equity and debt at about 1.5 times projected 2020 revenue of nearly $300 billion, Eikon data show.
Home Depot, an American home improvement supplies retailing company that sells tools, construction products and services, and which is sometimes called as the do-it-by-yourself category killer, outwitted Amazon at 1.8 times projected sales. That may reflect the fact that 40 per cent of its online sales are picked up at over 2,200 stores, giving it a potentially defensible mix of e-commerce and bricks and mortar.
Motor-parts chain and the second largest retailer of aftermarket automotive parts and accessories in the United States, AutoZone may represent another retail slice that is somewhat Amazon-resistant. The $19 billion company trades at 1.5 times 2020 sales, a recognition that it has created a supply chain that minimizes inventory without crimping a timely ability to fulfil customer orders.
Even in the rag trade, there are bright spots. At 1.4 times projected 2020 sales, $23 billion Ross Stores, which sells reasonably priced clothing through more than 1,500 outlets, fetches an enterprise valuation close to Amazon’s. TJX Companies, operator of TJ Maxx and Marshalls, lingers at 1.1 times sales. That is below Amazon but well above peers like Macy’s, a department store that operates 728 store locations in the continental United States, Hawaii, Puerto Rico & Guam, as well as Kohl’s – another department store retailing chain in the U.S.
It is known that Amazon has developed a fearsome reputation for moving into new businesses and decimating its competition. When J.Bezos will be done crushing the grocery business, he may seriously think about putting Amazon’s sights on car parts, plumbing accessories and cheaper clothes. But at least for now, they can keep calm and enjoy their success in already conquered areas.