I love Amazon. I have a Prime account and hardly a day goes by without a box showing up on our doorstep. The convenience is unbeatable, the service is outstanding, and the pricing is virtually unbeatable. Plus, when you throw in the fact that the Company employs not one, but two of my kids, it’s pretty obvious that my relationship with Amazon extends far beyond merely liking them.
Our family is not alone in loving Amazon. The Prime subscriber growth has been phenomenal, peaking this week on “Prime” day, a day in which Amazon offers outstanding deals for Prime members. It was the largest shopping day ever on Amazon, up 60% over last year’s Prime day…which was the largest day ever at that time.
For Amazon things seem to just keep getting better.
Yet, not everyone loves Amazon. For all the convenience they offer, Amazon has hurt local retailers, who suffer from lower foot traffic and impaired margins as they strive to compete.
National retailers are also hurting. Amazon has climbed from virtual non-existence 20 years ago to being the number 10 global retailer…and, with the growth they’re seeing, it’s pretty clear that top 4 status is only about 1 year away.
Now, with the purchase of Whole Foods, Amazon is moving from being solely online shopping, to being a hybrid model where they have actual locations that can also act as online distribution locations.
This acquisition appears to be the catalyst for bringing all the fears represented in Amazon’s growth to the forefront. For example, when an acquisition takes place, usually the whole industry rallies…obviously there’s value here. But, in the case of Whole Foods, the acquisition sent shares of competitors in a tailspin. The fear of competing with Amazon is palpable and no one wants a piece of it.
It’s even gotten to the point where Wall Street has created a new ETF that shorts retailers that are weak in online and, thus, suffering from AMZN’s growth.
Which brings us to the dilemma that is eventually (and maybe sooner than you think) going to confront our lawmakers. Is Amazon too big and powerful?
It’s certainly an interesting question. In terms of overall sales, they are not dominant. And, they provide a serious benefit to consumers; Amazon is anti-monopolistic in their pricing behavior…they are driving cost savings and passing these directly through to consumers. Why would lawmakers disrupt a company that SAVES citizens more and more money every year?
Yet, there is a downside to online shopping. As more business goes online, retailers suffer, which leads to inevitable layoffs. Then malls and shops get less traffic, rents go down, businesses go belly up, etc. It is becoming a self-fulfilling prophecy that online shopping is disrupting a major part of our economy.
Amazon, as the largest online retailer in the US (by far) is inevitably going to be a target.
The above article is from MarketWatch. In it, a vocal hedge-fund manager, Douglas Kass, talks about how AMZN is already on the radar screens of regulators and that it’s inevitable that the company gets shackled in some way, if not dismantled. The article is a good read, but, more importantly, I believe it’s the first of what will be many articles speaking about the danger of Amazon’s growth and increased sway over consumers. AMZN could well end up being a victim of its own success, similar to AT&T back in the day.
As an investor, I continue to own AMZN. The company is amazing, and not just for being smart enough to hire two of my kids. It is changing the world, but not on its own. They just happen to be the poster child for the inevitable destruction of yet another business model by the overwhelming dominance of the internet. As such, there’s a chance they end up becoming too big and falling prey to Washington politics. However, it’s a tricky sell, going after the company that saves Americans more money than any other. So, I’m willing to bet the scrutiny increases, but nothing slows the amazing Amazon growth for several more years to come.Tailwinds' Disclaimers & Disclosures: For a full list of disclaimers and disclosures, please visit http://