Call it death by Jeff. The juggernaut that is Amazon.com Inc. (AMZN) keeps on rolling. Amazon is putting its flag in the ground in one industry after another𒊎, cementing its role as the global leader in virtually everꦑything.
As the empire Jeff Bezos founded grows, companies are forced to adapt or close. Whether it be its acquisition of Whole Foods Market Inc. (WFM), its partnership with Nike Inc. (NKE), or one of its many new depa🥀rtments like "Wardrobe and Handmade," Amazon is fly🍬ing.
Bezos is the richest person in the world as of 2019, with an estimated net worth of $160 billion. It's certainly good to be Jeff Bezos, but not so good to be working in one of the sectors he decides to enter.
UPS and FedEx
At some point, Amazon's Bezos must have asked himself why he was paying so much money to United Parcel Service (UPS) and FedEx (FDX).
By 2019, the company was delivering about 26% of its own orders directly to custome🐼rs, according to Wolfe Research. Not incidentally, it alꦡso had become a player in the business shipping and logistics business.
Key Takeaways
- Amazon's reach has moved well beyond retail and into other industries that it can disrupt using its lower-price model and its vast warehouse network.
- Amazon Wardrobe was designed to remove any resistance shoppers had about buying clothing online.
- Business shipping was a natural fit. Amazon ordered 20,000 vans last year and is directly competing with FedEx and UPS.
Amazon Air now has 50 planes flying out of several regional hubs. It ordered 20,000 vans in 2018. It's testing sidewalk delivery robots to help solve that tricky and expensive "last mile" problem in home delivery.
The company also is working on a delivery serviꩲce for a business called Shipping with Amazo🗹n, or SWA. Amazon will pick up packages directly from other businesses and ship them to customers. Amazon is testing the service in Los Angeles and London, where customers say its rates are about half those of the competition.
The new shipping program will put the company in direct competition for the business of ma💖jor U.S. shippers UPS and FedEx. The effect on the market could be massive, especially if Amazon is able to offer lower prices than its competitors.
Important
PillPack plus Amazo൲n means that no ♏one has to go out to a pharmacy to fill a prescription anymore.
Walgreens, CVS, and Rite-Aid
Amazon has long wanted to enter the lucrative pharmaceutical industry and, in mid-2018, it did just that, by acquiring PillPack, an online pharmaceutical company. PillPack's online presence, combined with Amazon's shipping expertise, will allow people to avoid making trips to a pharmacy to fill a prescription.
Shares of Walgreens Boots Alliance (ꦬWBA), CVS Health Corp. (CVS), and Rite-Aid Corp. (RAD) all tanked on the news, losing a total $12.8 billion in market cap.
Blue Apron
The timing of the Blue Apron (APRN) IPO could not have been worse. Leಌss than two weeks after Amazon's $13.7 billion acquisition of Whole Foods, the New York-based meal kit delivery company opened on the New York Stock Exchang🍌e and became the biggest IPO flop of 2017. Finishing its first day flat, shares of Blue Apron have seen a steady decline.
The bad news for Blue Apron continued when Amazon announced it plans to enter the ready-to-eat meal business. A patent filing from Amazon with the slogan "We do the prep. You be the chef," was the last thing Blue Apron investors wanted to hear.
Shares of APRN were h💞overing ♍just above $1 at the end of April 2019.
Macy's
Macy's, Inc. (M) has been in decline for a while, and Amazon's growth has hastened its downfall. Macy's was trading at an all-time highౠ above $69 in July 2015. At the end of April 2019, it was a bit above $24.
A potentially big blow came from Amazon Wᩚᩚᩚᩚᩚᩚᩚᩚᩚ𒀱ᩚᩚᩚ༺ardrobe, a personalized fashion service that aims to remove any qualms a shopper has about online clothes shopping.
Fast Fact
By March 2019, Amazon had bypassed Walmart and Target to become America's biggest apparel retailer.
Macy's isn't the only department store feeling the burn. Nordstrom Inc. (JWN) and Kohl's Corp. (KSS) are feeling the pressure, and if the oracle of Omaha is correct, the future is anything but rosy. "The department store is online now," Warren Buffett said at Berkshire's annual meꦫeting in M🐼ay 2017.
Costco
Costco Wholesale Corp. (COST) waꦡs once the big fish in the retail market pond. Its subscription model was the first of its type, putting pressure on the everyday retailer. But as Amazon continues to climb, Costco has stalled.
In 1993, Costco merged with Price Club, and subscriptions surpassed 80 million in 24 years. Compare thꩵis to Amazon Prime. It launched in 2005 and, as of late🔜 2018, had an estimated 97 million members in the U.S.
While Costco is 🌠not just a grocery store, the deal between Amazon and Whole Foods was a hit to Costco and its investors. After the announcement of the acquisition, shares of Costco fell 10 percent and slid into bear territory, trading at $150 per share in July of 2017, its lowest level since December 2016. Shares have bounced back since and were trading at around $245 in late April 2019.
Etsy
Etsy Inc. (ETSY), the online marketplace for boutique goods went on a job-cutting spree in the summer of 2017, firing 22% of its staff 🐻in two rounds. The cuts came as big brother Amazon expanded its Handmade brand, whic𒁃h was launched in 2015.
Some Etsy sellers refused to list on Amazon aft🍷er complaints it was copying their products and selling them at a lower price.
Amazon's growth has squeezed Etsy's margins to a point where listings continued to rise but profits stagnate. After going public in 2015, its stock price rose above $30 a share. However, as profits flatlined, its share price fell, trading back below its IPO price of $16 a share. Etsy has recovered since and was settling at around $67 a share as of the end of April 2019.
Etsy's survival hinges on its ability to retain its hand-crafted appeal.
Foot Locker
Sports apparel retailers are already up against it. More competition, cheaper alternatives, and millennials' frugal habits have put pressure on the company to keep store sales up. Foot Locker Inc. (FL) earnings for the first-quarter of 2017 were a big miss that saw the stock plunge 17% in one day. The news that Nike, a big product for Foot Locker, will begin selling on Amazon as well wa🔴s yet another blow for the flailing retailer.
The news was a big hit for the industry as a whole. "Shares in several major sports chains hit 52-week lows on word that Nike may soon be selling its gear directly on Amazon," the Associated Press reported. In May 2018, Footlocker announced that they will close 110 stores.
Every Grocery Store on Earth
Amazon's shopping spree that included a $13.7 billion purchase for high-end grocery chain Whole Foods decimated the supermarket industry's stock prices. The overlap of a high-end supermarket brand and a trusted e-commerce giant is a scary thought for supermarket rivals.
A big dent to other food providers is Amazon's access to Whole Food's own 365 Brand. Consumers will no longer have to leave the house to fulfill their organic shopping needs. The Trader Joe's run or weekend farmers market visit could be replaced by a click of the mouse.
Barnes & Noble
One of the first retailers to fray at the edges was bookseller Barnes & Noble Inc. (BKS). (Its erstwhile rival, Border's bookstores, gave up in 2011.) Amazon, which started as an online bookstore in 1995, is now the world leader in book sales. The Amazon Kindle is now the dominant player in the e-reader market, too, although the company is cagey about numbers, s👍aying only that "tens of millions" have been sold.
In July 2015, Barnes & Noble's share price reached an all-time high of $28.66, but as Amazon grew, so did B&N's skeptics. Since that time Amazon shares have quadrupled while shares of Barnes & Noble plummeted, hitting about $5 a share at the end of April 2019.
The Bottom Line
Th🤡e rise of Amazon is a phenomenon. What started out as a small online bookstoﷺre has grown into an $815 billion behemoth that continues to disrupt industries and change the way goods are consumed and distributed.
As its partnerships and acquisitions continue, the company structure may look a little confusing. However, the way it gotᩚᩚᩚᩚᩚᩚᩚᩚᩚ𒀱ᩚᩚᩚ there is anything but confusing.
"We've had three big ideas at Amazon that we've stuck with for 18 years, and they're the reason we're successful: Put the customer first. Invent. And be patient," Bezos to The Washington Post in an interview. He owns The Post too, by the way.