AMZN Stock: This Consumer Spending Shift Is Only Sparing Amazon.com, Inc.

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It sounds strange to be saying it just two days after Amazon.com, Inc. (NASDAQ:AMZN) reported this year’s now-annual “Prime Day” drove a 60% increase of last year’s Prime Day tally, in the process creating a new single-day sales record for the e-commerce outfit.

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But, consumers (and U.S. consumers in particular) are buying less stuff. Instead, they’re spending hard-earned disposable income making memories.

It’s not just an anecdotal, one-time quirk saying this is the case either. There’s more than a little bit of long-term, persistent evidence of this paradigm shift. And, while AMZN shareholders can rest relatively easy in the knowledge that Amazon seems to be an exception to the new norm rather than a victim of it, smart investors would do well to consider the trend when reworking their portfolio.

Not a Temporary Fluke

It’s not a new idea, but it’s not an idea that’s been well-circulated with the financial media world; bigger-picture themes are often tough to talk about. The Money magazine wing of Time.com did a pretty solid job of advancing the discussion on Tuesday though, when columnist Alicia Adamczyk penned “Americans Aren’t Buying Stuff Anymore.”

She was right, but even she may not have known how right she was, or why.

Her thesis was built on some research performed by Bank of America Corp (NYSE:BAC), which looked at consumer spending habits — using credit cards — for the past year.

In short, department stores and home decor suffered at the hands of sporting goods and restaurants. The B of A report specifically noted that sales for iconic retailers Nordstrom, Inc. (NYSE:JWN) and Macy’s, Inc. (NYSE:M) were both down on a year-over-year basis as of the time the data was gathered.

AMZN shareholders are quick to give Amazon.com the credit for the demise of brick and mortar retailing, and to be fair, the e-tailing giant has certainly played a role in department stores’ weakness.

To be completely fair, however, the change in consumer spending preferences is much bigger than a change in the shopping venue.

While the study points in a certain direction, it may or may not be truly scientific. More (and better) empirical evidence from the Census Bureau about ALL retail spending habits would confirm or question the idea.

As they say, read ’em and weep.

Spending at department stores and furniture stores has been dwindling since 2012 — on a year-over-year basis — and is now entering negative territory. Spending at sporting goods stores and hobby stores, however, is perking up. Ditto for restaurants and bars. May’s consumer spending for sporting goods and hobby items was up 5.2%, while restaurant sales were up 6.5%.

This Consumer Spending Shift is Only Sparing Amazon (AMZN)

These aren’t the only consumer spending stratification, but they paint the picture well enough.

Why is Consumer Spending Changing?

As for the “why,” a handful of different but related factors come into play.

One possibility is simply that consumers have grown tired of constantly burying their face in an electronic device. Now, for a change, they’d like to get out and participate in physical and social (face-to-face) activities. They’re choosing to buy the appropriate toys and diversions over the acquisition of clothes and furniture.

Perhaps the biggest reason we’re seeing this slow but significant shift, however, is Facebook Inc (NASDAQ:FB).

Yes, Facebook.

While the charming social networking website has since become aggravatingly big, it still tells users what their friend are doing as well as it ever has … and nobody likes to stand by and watch their friends have all the fun. Millennials call it FOMO, short for fear-of-missing-out, and most consumers between the ages of 13 and 67 have confessed they experience it. And, with Facebook capable of shoving everyone else’s experiences down your throat with just the click of a button, it’s not difficult to develop a “me too” mindset.

The hard stats: In a recent Harris poll, more than three-fourths of millennials said they’re rather buy an experience over a physical good.

Thing is, it’s not just millennials.

In that light, this shift in consumer spending preferences makes a lot of sense.

Bottom Line for AMZN and Everyone Else

It’s not a minor matter. This trend, more so than the advent of internet alternatives, is doing serious damage to brick and mortar retailing. It’s a cultural trend that may not stop for years, if ever. Some companies will be powerless to resist it. Other companies will thrive in such an environment.

Superficially, Amazon.com seems vulnerable, but that’s not yet proven to the case. Indeed, it’s probably safe to say AMZN is a reliable exception to this norm that’s devaluing things and inflating the value of memories.

For everyone else though, it’s time to start planning for the time when the trend reaches a tipping point.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2016/07/consumer-spending-amazon-amzn/.

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