Amazon (NASDAQ: AMZN) is positioning itself to threaten many more main street businesses. The online-retail giant just opened an 800,000 square-foot fulfillment center in North Las Vegas, Nevada, that is capable of packing and shipping large items including big-screen television sets, furniture and even kayaks, a press release indicates.
The implications of this move are obvious Amazon is entering the furniture and appliance business and expanding its dominance of sporting goods. That increases Amazon’s threat to a wide variety of companies including home-improvement center operators like Lowe’s (NYSE: LOWE) and Home Depot (NYSE: HD), electronics retailers like Best Buy (NYSE: BBY), and sporting goods retailers like Dicks Sporting Goods (NYSE: DKS).
This also increase Amazon’s threat to legacy department store operators such as JC Penney (NYSE: JCP) and Sears (NASDAQ: SHLD) which are dependent upon appliance sales. JC Penney in particular is heavily vulnerable because it just reentered the large appliance business after an absence of many years.
The Retail Apocalypse is About to Get Worse
Many of these retailers are dealing with stagnant or declining revenues. Large appliance sales are among the few revenue streams with a prospect of growth that they have left. If Amazon can capture even 10% of their business by selling larger ticket items, it might drive more than a few of those brands out of business.
That would expand Amazon’s market share and probably increase public pressure on the retailer. The retail apocalypse is heating up on America’s main streets destroying thousands of jobs and hundreds of stores. Amazon is one of the obvious culprits behind that phenomenon; and Donald Trump has already scored political points by attacking the company.
Expect pressure on Amazon to grow as it struggles with the logistical problems of selling larger ticket items. Two problems Amazon will face are delivery; UPS and FedEx don’t haul refrigerators and you cannot ship a couch through the US Postal service, and installation. Much of Best Buy, Lowe’s and Home Depot’s success is based on their ability to ship and service large ticket items particularly appliances.
One wonders how Amazon will handle set up and delivery. Would it utilize other retailers; or hire independent contractors, perhaps with an Uber type app? Either solution sounds expensive because Amazon would have to share revenue with either group.
There are many other logistical challenges here including long-term service and repair and returns. One has to wonder how Amazon is going to handle them.
A major reason why Amazon is doing this is to head off Walmart (NYSE: WMT) which is making a major push into online retail. Walmart, unlike Amazon, has the infrastructure in place to handle such large ticket items on a local basis. IE it can ship the goods to local stores in its fleet of trucks and have customers pick them up or deliver the items.
Walmart is already experimenting with one possible delivery solution in the form of Uber and Lyft contractors that pick items up from stores. There are millions of guys with pickup trucks and vans in America that might need part time work. Such delivery would be an ideal gig for them.
It looks as if Amazon is about to change America’s retail landscape again. One has to wonder if this latest retail experiment will work?