We all know that Amazon.com, Inc. (NASDAQ:AMZN) is dominating the traditional retail sector. Stalwarts such as Wal-Mart Stores Inc (NYSE:WMT) and Macy’s Inc (NYSE:M) have gotten hammered this year while Amazon stock is up almost 33% year-to-date.
Beyond the obvious victims of Amazon’s rise to prominence, what other companies are at risk?
Last week, Amazon stole a big piece of Blue Apron’s IPO roadshow thunder by announcing that it is going to acquire Whole Foods Market, Inc. (NASDAQ:WFM). The online grocery strategy is still being tinkered with, but that transaction has had investors taking a pause to consider implications for not only the grocery industry but also others.
High margin ticketing perhaps? How about the quirky handcraft industry? No one is safe, especially these three stocks to sell.
Stocks to Sell: Blue Apron (APRN)
Talk about bad timing. Blue Apron, with the intent to list on the NYSE under the ticker ‘APRN,’ was going about its business touting strengths such as a “powerful and emotional brand connection,” “attractive unit economics,” a “hard-to-replicate value chain,” “proprietary technology and data” and “expertise across diverse competencies” when Amazon indirectly popped the balloon at its pre-IPO party.
I don’t know about an emotional connection, but AMZN has certainly created significant customer loyalty — some might call it dependency. In fact, up against Amazon’s platform, Blue Apron’s listed strengths don’t seem all that unique. Instead, they seem more like logical prerequisites.
According to APRN’s S-1 filing:
“We have reimagined the traditional grocery business model and developed an integrated ecosystem that employs technology and expertise across many disciplines … We gather and infer information about our customers’ tastes, food preferences, and order behavior to forecast near-term and long-term demand. We also manage and influence demand, including through our content, proprietary software tools, and e-commerce experience.”
On the basis of tech prowess, in addition to analyzing customer behavior and influencing future behavior, AMZN has the edge. Blue Apron is now facing a formidable competitor, one that it probably didn’t consider too seriously before and on such a short timeline. Competition, I might add, that is very long-term focused.
Stocks to Sell: Etsy Inc (ETSY)
I suppose Etsy Inc (NASDAQ:ETSY) technically qualifies as retail but certainly not traditional brick-and-mortar retail. Fittingly headquartered in Brooklyn, NY, Etsy’s stated mission is “to reimagine commerce in ways that build a more fulfilling and lasting world.”
In practice, ETSY owns a platform that connects buyers and sellers of bespoke products, often handmade. As of December 31, 2016, its platform connected 1.7 million active sellers and 28.6 million active buyers with reach that touches “nearly every country in the world.”
Last year, Etsy posted respectable results. Gross merchandise sales were up 19% year-over-year, growing from $2.39 billion to $2.84 billion; 2014 clocked in at $1.93 billion. Revenue growth was impressive as well, up 33% since 2015.
So, what does Etsy’s TAM look like? According to the Association for Creative Industries, creative products is an approximately $44 billion market in the United States alone. Most sales occur offline, which is where Etsy can add value via technology and ease of transacting without sacrificing positive buyer experience.
$44 billion in the U.S. alone. That’s a sizable figure, and AMZN has taken notice.
‘Handmade at Amazon’ is a new store on Amazon.com for invited artisans to sell their handcrafted goods. After meeting certain requirements e.g., products must be made entirely by hand, hand-altered or hand assembled by you or an employee (for companies with less than 20 employees) you are eligible to sell on Amazon’s platform to its 250 million strong customer base.
Little data has been released given that this is the early innings for AMZN in this space, but this poses a very real risk to ETSY’s topline growth rates.
Stocks to Sell: Live Nation Entertainment (LYV)
Amazon hasn’t gone into the concert business yet, but it has quietly been pushing into the ticketing world. In late 2015, AMZN launched Amazon Tickets U.K.
To be clear, Ticketmaster is but one part of Live Nation Entertainment, Inc. (NYSE:LYV). The two merged in 2010, creating a company that, through a variety of subsidiaries, is involved in managing artists, promoting acts, negotiating with venues and of course, ticketing.
Due to the relationship (aka exclusive distribution agreements), Ticketmaster has with desirable concert venues, many artists choose to sell their tickets through its service. It has been the dominant ticket seller for decades. When the 2010 merger took place, Ticketmaster had roughly a 70% market share of the ticketing business.
But these agreements and deals with venues and promoters don’t in and of themselves constitute a moat. Deals can always be and always are renegotiated if a better one comes along.
No player thus far has had the technology capabilities and active customer base to go toe-to-toe with LYV. But Amazon does. It’s an industry ripe for disruption, and AMZN has the firepower to do so and take market share from the incumbent.
As of this writing, Luce Emerson did not hold a position in any of the aforementioned securities.
