I hate shopping. I just want to get what I want and get out of there. I don’t want to waste my time driving, parking, wandering the store, and then having to go to another store if I can’t find what I want. I love shopping on the internet. I’m always near a computer and if I need something it’s just a few clicks of the mouse away. The best part is usually the things I want are cheaper online. The shipping costs may change the cost structure but I’m glad to pay the shipping costs because it keeps me away from stores and frees up my time to do something else and I’m not the only one.
Like cloud computing and software eating hardware, the shift to e-commerce is a long-term trend that is changing the current business environment. One of the earliest and biggest winners in the e-commerce trend is Amazon (AMZN). The losers? Retail chains.
Dan Frommer of SplatF highlights the chief complaints coming from the retail chains and where Amazon is squeezing them.
A brief rundown of recent cries for help from the retail chain world:
- This morning, Barnes & Noble — whose biggest competitor is Amazon — “lowered its guidance for every one of its 2011 fiscal year metrics, including revenue, EBITDA, and online and offline sales,” Peter Kafka writes for All Things D. The Nook tablet is apparently popular, but the other Nooks aren’t, and digital content sales are up. Meanwhile, B&N isconsidering spinning off the Nook business. It only expects retail same-store-sales to grow 1% this year. And it expects a full-year loss. (More coverage at All Things D and Techmeme.)
- Also this morning, Target reported disappointing December sales. “December sales were below our expectations as growth in Grocery and Beauty offset softness in Electronics and Music, Movies & Books,” the company said in a release. Electronics, music, movies, and books — Amazon’s (and Apple’s) sweet spots, now Target’s weak spots.
- Last month, Best Buy reported lousy sales growth and predicted declining margins, which sent its stock down. Its comparable store sales grew 0.3% during the quarter. On the company’s earnings call, CEO Brian Dunn said of the holiday shopping market: “as we’ve all observed so far, retail has been very promotional and consumers have been value-conscious.” I can’t imagine the lower pricing and free shipping at Amazon aren’t driving sales away from Best Buy — and I can’t see that trend reversing itself. (More about Best Buy’s problems at Forbes.)
Amazon may not necessarily be a bargain at today’s prices but understanding this long-term trend needs to be factored in when retail chains start hitting those value screens, like Best Buy (BBY).
Source:
Amazon is doing its real job: Squeezing retail chains (Splatf)