Death by Jeff. The juggernaut that is Amazon.com Inc. (AMZN) keeps rolling on, spending as much as its millions of active users make for it. One industry after another, Amazon is putting its flag in the ground, cementing itself as the global leader in virtually everything.
Left reeling in its path are companies that are having to adapt or are close to giving up as the Bezos' empire grows. Whether it be its acquisition of Whole Foods Market Inc. (WFM), its partnership with Nike Inc. (NKE) or one of its many new departments like "Wardrobe and Handmade," Amazon is flying. (See also: Introducing Your New Wedding Planner: Amazon)
President Donald Trump has taken to Twitter on numerous occasions calling out Amazon for hurting companies, taking away jobs and not paying enough taxes.
— Donald J. Trump (@realDonaldTrump) March 29, 2018
Bezos has a net worth of $138 billion as of June 28, 2018, making him the richest person in the world. It's certainly good to be Jeff Bezos – not so these nine companies.
Barnes & Noble
The first retailer to come off the shelf (so to speak) was Barnes & Noble Inc. (BKS). Amazon, which started as an online bookstore in 1995 is now the world leader in book sales. Launched in 2007, Amazon Kindle is now the dominant player in the book market. In 2014, Forbes estimated that Kindle makes up 19.5 percent of all book sales globally, and according to Morgan Stanley, Amazon has sold $5 billion in Kindle devices. Since then it's been uphill for Amazon and downhill for the retailers.
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 more than doubled while shares in Barnes & Noble plummeted, hitting $5.95 a share in June, 2018. The stock is down almost 80% percent from its 2015 high. How long can Barnes & Noble hang in there? According to a Quartz article last year, for nearly every bookstore Barnes & Noble lost in 2017, Amazon would have opened a new one.
The decline of Macy's Inc. (M) has been coming for a while, and Amazon's growth has hastened its downfall. Although Macy's posted fantastic first quarter earnings in 2018 (sales grew 3.6%), they are constantly threatened by Amazon. As of June 28, 2018, Macy's stock price is down roughly 45% from its all time highs in July, 2015. A potentially big blow may come from Amazon Wardrobe, a service where customers can try-before-you-buy apparel. In an April, 2018 research note, Morgan Stanley estimated that Amazon will pass Walmart and become the top player in the U.S. apparel industry in 2018.
Macy's isn't the only department store feeling the burn. Nordstrom Inc. (JWN) and Kohl's Corp. (KSS) are feeling the same 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 meeting in May 2017.
Costco Wholesale Corp. (COST) was once the big fish in the retail market pond. Its subscription model was the first of its type, putting pressure on the everyday retailer. However, as Amazon continues to climb, Costco has stalled.
In 1993, Costco merged with Price Club, and in 24 years subscriptions surpassed 80 million. Compare this to Amazon Prime, which launched in 2005. As of a February 2018, 10-K filing, there were about 90 million Prime members and growth is headed in the right direction.
While Costco is not simply 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 to $150 per share in July of 2017 – their lowest level since December 2016. Shares have bounced back and were trading at around $209 in June, 2018.
Etsy Inc. (ETSY), the online marketplace for boutique goods was in a job-cutting spree, firing 22 percent of its staff in two rounds in the summer of 2017. The cuts came as big brother Amazon expands its Handmade brand, which was launched in 2015. Some Etsy sellers refused to list on Amazon after complaints it was copying their products and selling them at a lower price. On June 22, 2018, a Supreme Court ruling came out saying that states can collect sales tax from online shopping platforms. Though this is likely to hurt both Amazon and Etsy alike, the former is likely to feel less of a pinch as it already collects sales tax on non third-party sales. (See also: Supreme Court Tax Ruling Won't Curb Amazon Dominance)
Amazon's growth has squeezed Etsy's margins to a point where listings continue 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 before settling at around $40 a share as of June 2018. Etsy's survival hinges on its ability to retain its boutique appeal.
The timing of the Blue Apron (APRN) IPO could not have been any worse. Less than two weeks after Amazon's $13.7 billion acquisition of Whole Foods, the New York-based meal kit delivery company hit the New York Stock Exchange 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. Filing a patent with the slogan "We do the prep. You be the chef," was the last thing Blue Apron investors wanted to hear. Blue Apron shares trade at $3.16 as of June 2018.
Sports apparel retailers are already up against it. More competition, cheaper alternatives, and Millennials' shopping 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 percent in one day, and the news that Nike – a big product for Foot Locker – will begin selling on Amazon was 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 said. As of June 28, 2018, Foot Locker's stock price is down 29% from its all time high of 74.81 in January 2017. In May 2018, Foorlocker announced that they will close 110 stores this year.
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 runs, or weekend farmers market visit could be replaced by a click of the mouse.
UPS and FedEx
The Wall Street Journal reported that Amazon is preparing to compete with the United Parcel Service (UPS) and FedEx (FDX) as it takes further steps to create its own freight network. The company is working on a delivery service for businesses called "Shipping with Amazon," or SWA, a program in which Amazon will pick up packages directly from other businesses and ship them to customers. Amazon plans to pilot the service in Los Angeles and reportedly aims to expand into more cities in 2018.
The new shipping program will put the company in direct competition for the business of major US shippers UPS and FedEx and the effect on the market could be massive, especially if Amazon is able to offer lower prices than its competitors.
Starting June 28, 2018, Amazon will allow small businesses to rent out Amazon Prime vans giving entrepreneurs the ability to ship goods quicker, cheaper, and more efficiently.
Walgreens, CVS, and Rite-Aid
It seems as though there are no safe industries when it comes to Amazon. The company has long wanted to enter the lucrative pharmaceutical industry and on June 28, 2018, it did just that. Amazon will be acquiring PillPack, an online pharmaceutical company. Shares of Walgreens Boots Alliance (WBA), CVS Health Corp. (CVS), and Rite-Aid Corp. (RAD) tanked on the news, losing 12.8 billion in market cap. PillPack's online presence, combined with Amazon's shipping expertise, will allow people to avoid making trips to a pharmacy to fill a prescription.
The Bottom Line
The meteoric rise of Amazon is nothing short of phenomenal. What started out as a small online bookstore has grown into a $815 billion ship 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 got 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," Amazon founder Jeff Bezos said to the Washington Post.