Each year Amazon’s ownership of the e-commerce sales pie gets bigger and bigger. A couple of years ago they owned about 44 cents out of every e-commerce dollar spent. They are the online version of Wal-Mart. They drive prices down at the expense of their competitors and then raise prices when they have no competition left. COVID-19 or no COVID-19, as more and more dollars flow to the Internet, more and more retail stores are being added to the endangered species list or are dying off.
In the latest retail death goes to J. Crew. On Monday, J.Crew filed for bankruptcy, becoming the first major retail casualty of the pandemic. And if Sears and JCPenney might be the next companies to die off if they can’t get additional funding.
The number of packages Amazon needs to ship in the U.S. has more than doubled over the past five years. And according to analysts, more than $4 of every $10 spent online in the U.S. is on Amazon.com, and the number of its deliveries topped more than a billion last year.
Part of it is because Jeff Bezos lives in the future. If Amazon is going to continue to control its destiny and handle the continued growth of online purchases, they must continue to make inroads into their supply chain…and that’s what they did. Despite, buying more than 7,500 truck trailers, leasing roughly 35 aircrafts, the bottleneck remains “the last mile.” So in 2019, Amazon announced it was welcoming entrepreneurs to form small delivery companies to help it build out its own delivery network to your home.
The "Amazon Effect" has forced all retailers to step up their “omnichannel” game or face extinction. The ominichannel phenomenon is the ability to compete through brick and mortar and online by redesigning distribution networks and streamline supply chain operations to best serve customers on and offline. Target and Walmart are doing a great in this area, while other can’t compete, while others decided to raise the white flag and partner with them.
Kohl's now accepts Amazon returns at most of its stores and has Amazon shops in at least 50 stores where they sell Amazon products such as the Echo smart speakers over the holiday season. The partnership simplifying the returns process for Amazon and showcasing Echo devices and other Alexa-compatible hardware and in return brings in addition foot traffic into the Kohl’s stores. Case in point, the partnership was even able to gain traction with millennials, who otherwise would have ignored Kohl’s.
Also in 2019, Amazon dropped a bombshell that could have far-reaching implications, not only for rivals in the e-commerce industry but for its brick-and-mortar competitors as well. Amazon said it was working to shorten the standard delivery option for Prime members from two days to just one day.
And I feel what Amazon has done in the past 5-10 years has prepared them for today. COVID-19 has caused stores to close temporarily or permanently and retailers to furlough or layoff of hundreds of thousands of employees. Meanwhile, in mid-March 16, Amazon announced the hiring of 100,000 full- and part-time hires and as of today, all the positions have been filled. But COVID-19 has shifted so much demand to Amazon that in mid-April, Amazon announced they are hiring an additional 75,000 workers.
So when Amazon announced quarterly earnings last year, Jeff told investors that they may want to take a seat that the company’s profits were all accounted for.
Amazon said Thursday it would invest its expected $4 billion second-quarter profit in coronavirus-related efforts, including buying personal protective equipment for workers, stepping up cleaning in its facilities and building its own testing capability. The company said that due to the investment, it expects operating income for the quarter to be as high as $1.5 billion or as low as a loss of $1.5 billion.
The bold step is reflective of CEO Jeff Bezos’ approach since starting the business.
“We believe that a fundamental measure of our success will be the shareholder value we create over the long term,” Bezos told shareholders in a letter shortly after its IPO. “This value will be a direct result of our ability to extend and solidify our current market leadership position.”
And with this simple decision to reinvest the profits, Amazon just separated themselves from the competition a little more, actually a lot more. And the next couple of days I saw about 20 different Wall Street analysts raise their price targets for Amazon. For example, JPMorgan on Friday raised its price target for Amazon to $3,000...WOW.
This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.
