Amazon (Nasdaq: AMZN ) pioneered online retailing back in the 1990s. After more the 10 years, you'd think bricks-and-mortar retailers would get their act together and narrow the gap.
Easier said than done, it seems. It's not just that online retailers are gaining market share from bricks-and-mortar. It's that Amazon is getting a larger and larger share of online purchases. And I'm not just talking books and electronics. Amazon is becoming a general store for the 21st century.
It's old news to point out consumers are doing more of their buying online. What's noteworthy is that, according to a recent consumer survey by research firm TraQline, Amazon is taking share of online purchases in specialty retailing categories -- i.e., Amazon is doubly blessed by taking share in a segment that is taking share.
Here are a couple of examples from TraQline's survey:
Portable Power Tools
|% Sold Online-2005||5.0%||13.0%|
|% Sold Online-2010||9.0%||18.0%|
|Amazon's Online Share-2005||22.0%||17.0%|
|Amazon's Online Share-2010||37.0%||35.0%|
|Amazon's Total Share-2005||1.1%||2.2%|
|Amazon's Total Share-2010||3.3%||6.3%|
In portable power tools (drills, for example), Amazon's share of all purchases -- online and offline -- tripled from 2005 to 2010. Meanwhile, Home Depot's (NYSE: HD ) share of online sales in the category stagnated in the mid-single digits.
Likewise, in kitchen electrics (coffee makers, for example), Amazon's share of all purchases -- online and offline -- almost tripled from 2005 to 2010. Meanwhile, Bed Bath & Beyond's (Nasdaq: BBBY ) share of online sales in the category stagnated in the low-single digits.
Wal-Mart's (NYSE: WMT ) decision a few weeks ago to offer free pickup of online purchases at its local stores is evidence of the pressure Amazon is exerting on even low-price bricks-and-mortar retailers. But Wal-Mart shoppers still have to pay to have online purchases delivered to them, whereas Amazon makes it easy to get free shipping on orders over $25. How many Wal-Mart shoppers don't mind blowing the time and gas money to go pick up at a store? I don't know, but Wal-Mart's pickup policy is all not much different than Border's order online and pick up in store arrangement. Yes, the same Border's that filed for bankruptcy recently.
Amazon is not just a play on the shift to online retailing. Amazon is taking share of online retailing because it executes well and offers a compelling combination of attractive prices and convenience. Invest in companies that compete with that at your own peril.
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