Everybody has something to fear from Amazon.com (NASDAQ: AMZN), according to Berkshire Hathaway's Charlie Munger, except for Costco (NASDAQ: COST). That could mean the online leader will be able to disrupt other industries, including healthcare or image-based search.
In this segment, host Nick Sciple talks Amazon with Fool contributor Dan Kline. To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. A full transcript follows the video.
This video was recorded on May 7, 2019.
Nick Sciple: As we go away, I wanted to throw up another question for you, Dan. The next question that Jason Zweig asked Charlie was, "Hey, what about Berkshire? If Amazon should be afraid of Costco, should Berkshire be afraid of Amazon?" He said, "Everybody else has a lot to fear from Amazon." He didn't name Berkshire, he just named Costco. Charlie said that everybody has something to fear from Amazon. So, Dan, as we go away, just for a little fun, what is your boldest prediction for the next industry that Amazon might come to disrupt?
Dan Kline: I think Amazon largely has to go into industries that are already broken. If you're executing well -- and we've seen this in retail, the retailers who have executed well, Best Buy, for example, have done fine. I mean, Best Buy was a struggling company that made major changes and competes well with Amazon. But I think what's broken is pharmacy. If you look at Amazon, they have your credit card information, they have all of the customer service help, they own PillPack, so they have the mechanism in place to get you drugs. And they haven't quite figured out how to connect that. But I assume at some point, my health insurance is going to be incentivizing me to go to Amazon because that will be the cheapest way to get drugs. Right now, you could argue that Costco might be the cheapest way to get drugs. And still, it's not a huge part of their business.
Sciple: Yeah, getting that pharmacy space, as healthcare becomes a bigger share of the economy, clearly something Amazon is going after. For my bold prediction, I think Amazon is going to go after image-based search. I think they're going to go after the Pinterest/Instagram market of the world. As you've seen over the past year, Amazon has really pushed into the purposeful search aspect of the market, growing their advertising presence and taking some market share away from Google. Again, a lot of what Amazon has done throughout its history, whether it's through AWS or recent moves when it comes to freight brokerage services for third-party sellers, they've really solved some problems for third-party folks. The problem that Amazon hasn't yet solved is that discovery buying process that you really get from something out of a Pinterest or an Instagram. I think, given that they've already shown a move to go after that purposeful search part of the category, it would really be interesting to see Amazon go after that more discovery aspect, image search aspect of the market. We'll see how it goes. But Amazon is always disrupting everybody. We'll see.
Kline: Some of that ties to technology. One of the things you and I have talked about before is, I bought pants using a tailor that I set up on my phone and had to spin around. And the pants were OK, but... Amazon at some point will be the leader of that. You say image-based search, but I think it's more driven image-based, where I'm going to show Amazon, "This is what I wear, and these are things I like," and Amazon is not only going to show me some things that are like it or fit that mold; they're actually going to show me how I look in those things. That's where the real disruption could come in. Think about it now -- how absurd is it to drive to the mall, go to Macy's, pick through some things, take them into a room and try them on, when realistically, robots can do that better and you don't have to go anywhere to try things on. Stuff should just show up that fits you.