Black Friday has arrived and with it come news clips of determined shoppers scrambling through the local Best Buy for gadgets and gizmos, but why bother when you can point and click in your PJs?
That’s where Amazon wants you anyway, and thanks to years of investing in its e-commerce infrastructure, no one is catching Amazon anytime soon, says Evan Clark, deputy managing editor at Women’s Wear Daily.
Amazon (Amazon Stock Quote, Chart NASDAQ:AMZN) and the rest of the FAANG stocks are in a sizeable funk at the moment, dragged down by fears of regulatory challenges and trade tariffs, along with a more widespread profit-taking in the tech sector which has performed admirably over the past few years. Putting the recent pullback into perspective, Amazon’s share price is up 400 per cent since the start of 2015, and that’s including the 26 per cent drop since early September of this year.
Investors reacted negatively to the company’s third-quarter financials delivered at the end of October, where Amazon beat expectations on earnings at $5.75 per share versus the estimated $3.15 per share, but it came up short on revenue, producing a top line of $56.6 billion versus the expected $57.10 billion. (All figures in US dollars).
More troubling was management’s guidance which projected fourth-quarter revenue in the range of $66.5 billion and $72.5 billion, lower than that expected by analysts at $73.79 billion. The news dropped the stock ten per cent overnight, marking one of its biggest losses in years.
But why worry when your closest competitors are so far behind? An e-Marketer report earlier this year predicted that a full 49 per cent of total US e-commerce sales in 2018 would be going to Amazon, with the other retail names like Walmart and Home Depot fighting over the scraps, each of them well below five per cent of the online sales market.
But Amazon’s dominance isn’t by chance, as the company has for years poured profits back into extending its reach, says Clark, in conversation with CNBC, who sees a silver lining for companies like Walmart and Target in the demise of holiday season giant Toys R Us.
“Amazon has spent the last ten years building out logistics and distributions centres that are second-to-none, so they’re still going to be hard to match,” says Clark. “Walmart is trying to build a platform to do that, but for the retailers it will be handy that Toys R Us has been blown away because as you bring in those families who instead of making that pilgrimage to Toys R Us for all of the holiday sales find themselves in Walmart or Target, and you can convert those shoppers to other categories.”
“Right now, no one can really give Amazon a run for their money on e-commerce. Walmart is the closest,” he says.
Disclosure: Cantech’s Nick Waddell owns shares of Amazon