Amazon (NASDAQ:AMZN) wants you to know that they aren’t killing small retailers. Instead, they are enabling them and helping bolster Amazon stock at the same time.
The ecommerce behemoth has long been credited with pioneering the Retail Apocalypse, wherein several small to medium sized retailers (and even a few big ones) succumbed to Amazon’s market share gains. But, Amazon is trying to change its reputation as a retail killer with Amazon Storefronts.
Storefronts is a subset of Amazon’s website wherein the company will feature over 1 million products from 20,000 small to medium sized companies across the U.S. While this may not seem like a big move, the implications are potentially huge for Amazon stock.
Why? Two reasons.
One, the whole “good guy” narrative wherein Amazon is now enabling small businesses as opposed to killing them will create a positive tailwind for consumer sentiment and sales. Two, small businesses represent a huge and growing chunk of the retail industry, and Storefronts enables Amazon to more effectively penetrate that important and valuable demographic.
As such, Storefronts is yet another reason to buy Amazon stock. It is tough to peg the exact size of this new opportunity for Amazon, but the implications are clear. The new Storefronts page enables Amazon to more deeply engage the huge and growing small business population.
The Sentiment Shift Will Create Tailwinds
Perhaps the most obvious benefit from Amazon Storefronts is the ostensible sentiment shift it creates for the ecommerce giant.
At the end of the day, price and convenience always win out. That is why despite developing a ruthless reputation for killing traditional retailers, Amazon has concurrently morphed into America’s largest e-retail player by a mile. Regardless of the company’s optics, Amazon always offers the lowest prices and best convenience and that combination keeps customers coming back.
Yet, there is something to said about the optics. You can dominate on price and convenience and be a winning company. But, if the optics are bad, you aren’t going to capture your full potential.
Amazon finally is improving those optics. I recommend investors check out the Little Flower Shop commercial running on the Amazon Storefronts page. The commercial is all about enabling small businesses, and helping them create awareness, generate demand, and fulfill sales. The vibes are positive, and the takeaway is that Amazon isn’t the Death Star after all.
That commercial is expected to air nationally on TV in what will be Amazon’s first commercial featuring a business that sells on Amazon. The national roll-out of that commercial could spark a meaningful sentiment shift surrounding Amazon that both consumers and small business owners will pay attention to.
The net result should be increased engagement from both buyers and sellers on Amazon’s marketplace.
Small Business Opportunity Is Huge
More important than a potential sentiment shift is the opportunity Storefronts present to Amazon to more deeply engage the small business community.
Small businesses account of a big part of the total retail picture in the United States. Retail small businesses account for 35% of total retail employment, while independently and privately held retail businesses account for 95% of retail industry sales.
Meanwhile, there are reasons to believe that the small business pool is only getting bigger. Startup rates are on the rise, companies like Shopify (NYSE:SHOP), Etsy (NASDAQ:ETSY), and Uber are enabling a new generation of motivated entrepreneurs, and decentralization trends globally are paving the path for more small to medium sized retailers.
In short, the small business opportunity is huge in the retail sector. And, that opportunity is only growing.
Amazon is already capitalizing on this opportunity. The company claims that half of everything sold on the site comes from small to medium sized businesses. But, Strorefronts will enable the company to more deeply engage this important and valuable demographic.
By creating a sub-site dedicated specifically to featuring small to medium sized businesses, Amazon promises to attract more sellers in this demographic.
I think that opportunity is huge. From where I sit, the world is becoming increasingly decentralized, and if Amazon can capitalize on this trend in the retail sector, that should create a meaningful long-term tailwind for Amazon stock.
Bottom Line on Amazon Stock
Hyper-growth tech stocks haven’t had the best go recently. But, Amazon stock is a long-term winner regardless of near-term noise due to the company’s multiple big-growth catalysts on the horizon.
One of those catalysts is Strorefronts, which will enable Amazon to more deeply engage the important and valuable small business community. This community is big and only growing, meaning that Storefronts could provide a meaningful long-term tailwind for Amazon stock.
As of this writing, Luke Lango was long AMZN and SHOP.
