“Why Amazon Is Such a Threat to the Grocery Industry” via The Atlantic
“Amazon is About to Claim a New Victim in the Retail Apocalypse” via Business Insider
“’Walmart on Steroids’: Beware of Amazon’s Growing Monopoly” via The Hill
The headlines related to Amazon can be quite hyperbolic.
No matter what the e-commerce retailer does, it generates hundreds of headlines and think pieces. And they’re all essentially asking the same thing: Is this the end of [insert industry or product here]?
While Amazon is ridiculously prolific and forward thinking, a recent report from Moody’s Investor Service suggests the numbers often don’t warrant the hysteria.
For instance, the idea that if Amazon pivots into a business, it’s immediately doomed is a fallacy, the company said. “Amazon can disrupt, but in fact it does not dominate any category. For example, we estimate it has roughly one third the share of consumer electronics that Best Buy Co., Inc. has,” the report said.
It’s misconceptions like this—coupled with the company’s ballooning share price—that are forcing Amazon competitors to act “irrationally” by only looking at the short term. “Although Amazon’s share price is outperforming retailers, conventional methods of evaluating operating performance, such as operating margin or any profitability measure, suggest that Amazon is actually the weakest of the large retailers, excluding sales growth,” according to the report.
By ignoring profits in the pursuit of sales, the company’s giving off a false perception. Further, Amazon’s product sales growth is only in the mid teens, lower than other retailers’ online growth. Addressing how competitors sometimes overreact, the report said, “We regard Staples’ decision to sell itself to private equity to provide a return to shareholders as an extreme example of what can happen.”
[Read more about Amazon’s apparel aspirations: Amazon’s Goes Deeper Into Apparel With New AI Fashion Designer]
News of Amazon’s deal to buy Whole Foods, which closed on Monday, was the latest thing to get hearts racing, as the retail industry held its collective breath in anticipation of how the e-tailer might disrupt the grocery store aisles.
While it’s still too soon to know the full scope of Amazon’s plans, already it has slashed some prices, introduced the supermarket’s private label on its own site and started hawking Echos in store. It’s also installing lockers from which shoppers can grab online purchases from the mother ship. That was all announced in the first week.
But what do the weeks to come have in store? Are other full-line grocery stores nearing their expiration date? Moody’s says there’s no reason to think grocery competitors don’t have plenty of shelf life left.
“We believe it’s a big stretch to say—as many in the market have been doing—that Amazon will dominate food retail, and some have said this will happen within two years,” the firm said.
As it turns out, Walmart is the 800-pound gorilla in the $800 billion U.S. food sales industry. The mass merchant commands more than 27 percent of the market. Moody’s estimates that even with Whole Foods, Amazon’s share is less than $20 billion.
Although Amazon wields plenty of power with its Prime membership model, which it plans to use as the Whole Foods rewards program, Moody’s said the company’s reach has been way overblown. Depending on the source, it’s believed that there are as many as 85 million Prime members. Not possible, Moody’s said.
Just crunching the numbers on those who would be most likely to have a membership (like households bringing in at least $30,000), Moody’s estimates the actual number of members is closer to 50 million. Costco has 86.7 million.
And finally, even with Amazon holding on tightly to its title as No. 1 in e-commerce sales, Moody’s said that simply makes it a big fish in a small pond. “For perspective, though, online sales still accounts for just roughly 10 percent of overall retail sales—which means that the big brick & mortar retailers, led by Walmart, remain very formidable competitors in this industry,” the report stated.
The ready made garment sector in Bangladesh suffered another tragedy on Wednesday when six workers perished in a textile factory fire.Read more
The call for sustainability remains rampant in the industry and companies, including LVMH and Guess, are setting new environmental goals for 2020.Read more
Faced with a mountain of debt and suppliers in retreat, Toys R Us filed for bankruptcy this week.Read more
Labeling could be a boon for retailers who are looking to address consumer preferences and prioritize sustainability measures.Read more
The Chinese government’s ongoing program to inspect factories throughout the country seems to have had only a minor impact on apparel and textile facilities thus far.Read more
If the world has been forever altered by the swipe left, swipe right culture of online dating, apparel sourcing may be forever changed by Foursource.Read more
When a company like MAS Holdings, a major Sri Lanka-based intimates, activewear and leisure wear supplier that produces more than one million garments every day starts eyeing startups, it’s clear where the industry is headed.Read more