The One Brick and Mortar Industry Amazon Can't Touch

       As another once-prominent S&P 500 stock files for bankruptcy due to the ever-growing e-commerce competition, I decided to research what went wrong for Sears... But I was actually more shocked to find a specific brick and mortar industry that has not been affected by the wave of cheap online products. But I shouldn't have been as surprised as I was. I mean, who could offer cheaper products then dollar and wholesale stores?



        At their core- Amazon is known for having an everlasting reservoir of inventory for low, affordable prices. But so are dollar stores. You can look at almost any major dollar store in the United States and see their net income rising over the last few years, Dollar General (DG) is up 50% in three years, Dollar Tree is up nearly 150% in the same time frame, Even Costco(COST) has a positive net income of over 600 million dollars since 2014.

         One of the biggest arguments people make when talking about investing in brick and mortar retailers is that the prices are a lot better on Amazon. So I decided to do some self-research and see if this was true. I picked a few random items from Dolar General and Dollar Tree and compared them to the Amazon price. I found little to no discrepancy at all. If anything the few cent difference leans in favor of the dollar stores more.



         The next biggest argument is Amazon's "convenience", yes their shipping is a lot faster than other e-commerce platforms and a lot cheaper... But it's only cheaper to those that order a lot online. Otherwise, it does not make any sense to have Amazon Prime. But you know what's even faster and more convenient than ordering something online? Buying it in store. You will get the item instantly, there is absolutely no shipping or handling cost ( Yes, you still pay for shipping with Amazon even if you have prime, you're just paying for it on a monthly or annual basis.) and you can physically hold multiple products in your hand and compare them.


        Even if the rumor of Amazon opening up physical store locations is true, can they compete? the rumor was that Amazon is planning on opening 3,000 cashier-less stores by 2021, the cashier-less part is impressive and all.. but what if you have a simple question and need to ask an employee? Can the 3,000 Amazon stores compete with over 30,000 Dollar Tree and Dollar General Stores? There are a ton of logistics that Amazon will have to figure out to be successful in the brick and mortar space. This expansion (which has not even been confirmed yet) could easily be a flop for Amazon.


       I do not own any of these companies but plan on buying shares of Amazon (Not for the retail reason) and will continue to monitor dollar stores. I will want to wait and see if Amazon can legitimately figure out the logistics of the stores.





No comments:

Post a Comment

Facebook Massive Earnings Beat

      Could Facebook's earning beat finally be the boost that tech stocks need? They are up 6% today after crushing earnings... Other co...