Among the companies benefiting the most from the e-commerce revolution is FedEx (FDX +3.98%), which ships a vast quantity of our online purchases to us. But according to what CEO Fred Smith said recently, even though the percentage of our purchases we'll make online is sure to grow, a new equilibrium will evolve -- one that will leave "old retail" still in possession of a majority of our business.
In this Market Foolery podcast segment, host Mac Greer is joined by David Kretzmann and Aaron Bush of Supernova and Rule Breakers to discuss that forecast.
A full transcript follows the video.
This video was recorded on Sept. 20, 2017.
Mac Greer: OK, guys. Other bricks-and-mortar news. On Tuesday, FedEx CEO Fred Smith said that e-commerce is not going to eliminate the retailing sector of the country. An interesting quote here by Smith. He said, "It's about 10% now; it's certainly going to grow as a percentage. But will it be half? I doubt it." Let's talk about that quote. Fred Smith on the future of e-commerce -- is he right that it may not even get to half? And if he is right, what does that mean for investors?
Aaron Bush: Even if they got to half, that would make me very happy. That's still huge. But I suspect that he's wrong, but it's going to take a very long time for that to play out. I think there still are very good reasons for there to be physical stores. There's showrooming. Concepts like grocery stores and convenience stores, those aren't going to go away at all. So I think there are a lot of smaller concepts that will stick around, and it doesn't make sense to go completely online.
David Kretzmann: Yeah, I think the lines will be blurring between the physical experience than the online experience, like we talked about. What classifies as an online sale, what classifies as in-store sale. But I still think there's a lot of room for e-commerce to grow, as Aaron was mentioning. Right now in the U.S., about 9%-10% of sales are online, like you mentioned. And that's doubled since 2010. Even in countries like [South] Korea, where e-commerce is closer to 17%-18%, which is the highest in terms of countries' adoption of e-commerce, they're still below 20%; less than a fifth of their retail sales are happening online. So I think there's still a lot of room to run with this transition, and I would expect that down the road it gets to 30%-50%. How long that takes is anyone's guess. I would expect it to accelerate in the coming years, but in general, I think there's still a huge opportunity. Whether it's 40% or 50% or 80%, there's still a big room to run.
Greer: And how about in that traditional retail space, that other 50%. Do you have a favorite name? I know we like Amazon (AMZN +0.53%) when it comes to online as being a company that continues to dominate and take market share. How about traditional retailers that may be Amazon-proof? What comes to mind?
Kretzmann: I'll throw out a couple. There's Tractor Supply Company, which I know, Mac, you and I know and love.
Greer: Yes.
Kretzmann: Just because they cater to people who are doing gardening, they might have livestock, the type of items that you buy in a Tractor Supply, like a 50-pound bag of feed or these heavy items. Those are things you're probably going to want some in-store service, and it's just not necessarily a logistically reasonable or feasible to ship a 50-pound bag of feed. Another one would be Camping World, which is a nationwide RV retailer. They're selling RVs, trailers, and they're also getting into boats and other outdoor gear and stuff like that. Those are items that I don't see being sold online anytime soon, so I think they have a nice little niche there as well.
Bush: I like to look for really strong brands. The No. 1 company that strikes me as more Amazon-resistant would be someone like Nike, which isn't really known for being a retailer, but they play in that playing field quite a bit with their own stores, as well as partnering, and they've even partnered with Amazon. I think what's most interesting to me isn't as much looking for the companies that are Amazon-resistant, but just looking for the companies that can stand on their own and partner with most anyone.
