Maybe not trying to destroy Brick and Mortar but it certainly seems to be steam rolling everyone that gets in its way!
Last week it was reported that Amazon may be looking to expand its own Brick and Mortar presence by rolling out its own grocery stores and retail stores that would serve as virtual showrooms for some key products that consumers might want to see and touch before making a decision to buy. Now we are hearing rumors that Amazon is meeting with key executives from large product companies and are in negotiations to cut out the “middlemen” in the supply chains in order to deliver products to the consumers through Amazon.
some of the companies invited to the Seattle meeting reads like a whose who list of name brand products like Nike (NKE), Unilever (UN) , Proctor and Gamble (PG) , General Mills (GIS), Mondelez (MDLZ), Kimberly-Clark (KMB) and others.
If successful this could very well spell the end of retail, at least as we know it now. There is no doubt that traditional retail is going through some serious transitions and changes but no one seems to know exactly how this will play out. Amazon has the power and clout to push it into different directions and right now they are the king of the hill.
Because of all this uncertainty about the future direction of retail and exactly who might be the winners and losers I recommend to steer clear of traditional retail stocks. The better play in my opinion are the suppliers and wholesale manufacturers which may be able to increase profits by the changes. Of course there could also be winners and losers in the suppliers imagine if Proctor & Gamble jumped on board with Amazon but Unilever failed to do so. That could leave the hesitant company locked out of a huge market place and be very detrimental to their bottom line. Also coming into play is Walmart. Walmart is reportedly putting pressure on suppliers to reduce their prices for Walmart by reducing the companies marketing initiatives just so Walmart can have the lowest prices and is threatening them with replacing their products with generic versions if they do not comply. If this is true then this might give companies even more incentive to team up with Amazon.
In addition to the big named retailers lots of smaller mom and pop shops could also be pushed aside as the distributors are forced out of play.
This will more than likely take months if not years to play out but will be interesting to watch and will keep every one, including investors on their toes during the process. As for me I am going to stay out of retail stocks altogether. I prefer to have a clear direction and understanding of a segment before investing in it. We could see a lot of pain and suffering in the retail sector for years and right now I don’t feel safe in it. That could very well change as soon as the big picture becomes clear but for now, my money will be going elsewhere
Your thoughts or comments are always welcome !