How Amazon (not the rain forest) disrupted numerous industries and has many more to go

By Jimmy Fuentes

 How $WMT $COST $SPM and $KR reacted after Amazon ($AMZN) finalizes Whole foods ($WFM) purchase. Courtesy of Yahoo finance. 

How $WMT $COST $SPM and $KR reacted after Amazon ($AMZN) finalizes Whole foods ($WFM) purchase. Courtesy of Yahoo finance. 

 

Amazon is finalizing their purchase of Whole foods today August 28th, 2017 for $13.4 billion dollars. The news caused some turbulence in the sell off of shares in many grocery related companies such as Kroger, Sprouts, Costco, and Wal-mart. Causing them to shed off roughly 5% in their share price. Consumer staples index took the hit as well, down by almost 2%. I, however, do not blame the shareholders for fleeing in such panic as it's not the first time Amazon has caused havoc in a certain industry. Let's see what else they changed for the better (or worse.) 

Some history behind Amazon it started off as a book store...

Amazon was founded back in 1994. It started off as an online book store, the book industry was dominated by Barnes and Noble and Borders at the time. Fast forward to 2007 and Amazon releases their first few Kindle products. Consumers now realize, understand, and enjoy the aspect of purchasing books and items and having it delivered to/from the comfort of their home. Borders fail to compete with the e-commerce giant and files for bankruptcy in 2011. Meanwhile, Barnes and Noble, who realized that Amazon was a large threat to their company, started focusing on their e-commerce, even still, the company has been struggling and has been trading at all-time lows. 

 Barnes and Noble share price 

Barnes and Noble share price 

 

Electronics

Do the names Circuit city and Radioshack ring a bell? The once electronics store giants, who were ranked top 5 in the country, were faced with hardship once Amazon started selling and shipping electronics. In the year 2000, Amazon launched its first category of electronics, in 2001, Amazon started to dominate the electronics market/market share. By 2004, Amazon was selling $1 billion in electronics every year. In turn, Circuit city failed to compete and filed for chapter 11 bankruptcy on November 2008. Circuit city decided to liquidate their stores and items, creating roughly $1.7 billion. All retail stores were shut down in March 2009 during the great recession. Systemax acquires Circuit city's brand name, trademark, and the e-commerce website that same year. Even still, Circuit city failed to compete with the now e-commerce giant Amazon. A few years later, Radioshack took a hit as well as they filed for bankruptcy on February. 2015 and only left 72 stores opened. 

Best Buy has been the only competitor that has shaken off the Amazon turbulence. Best Buy focussed heavily on their e-commerce portion of their business in comparison to Circuit City and Radioshack, furthermore, Best Buy has always had a great in-store experience which has also helped the business stay alive and well for now. 

 Best buy's share price

Best buy's share price

 

Anything retail

JCPenny, Macy's, Urban Outfitters, Kohls, Bed bath and beyond, Sears, Kmart, anything in the retail space that has failed to introduce an e-commerce portion to their business or has a weak e-commerce portion succumbed to the Amazon giant. Kmart is in the process of closing down 28 stores. Sear and Kmart collectively are closing down 150 come the 3rd quarter. Macy's is closing roughly 70 stores this year, JCPenny will close roughly 150 stores, Kohls is attempting to shrink stores, rather than closing them entirely, just last year, they closed 18 stores in total. Bed bath and beyond has now started hinting at closing some stores, Urban Outfitters plans to open 19 stores and close 7 next year. Point is, the physical foot traffic is decreasing in malls and shopping centers and is being allocated to e-commerce sites. 

Up next, groceries

With Amazon purchasing Whole foods, you best believe other grocery store related companies and their shareholders are frightened as to how Amazon will change the grocery store market share, as they have seen this similar side effect when Amazon starts infringing in a new market. Amazon has already hinted that some items in Whole foods will have their prices lowered. The companies competing must figure out a way to start selling organic food at lower costs and integrate a membership program just how Amazon prime offers numerous discounts to Whole foods clients. For the years that follow, it will be sink or barely swim for these grocery/supermarket companies. Just as we seen in electronics, books, and retail. 

What's next?

I'm not done, and neither is Amazon. Amazon has yet to figure out how they can start shipping furniture, hardware, and home appliances to people's home. As of now, Lowes, The Home Depot, and Lazy boy furniture are not threatened by the e-commerce giant. However, don't believe that Amazon's CEO Jeff Bezos isn't already scheming and planning to one day start selling home appliances, hardware, and furniture at a very discounted rate.