When Amazon so much as twitches in a new direction, Wall Street takes notice.
If you’re an investor or executive at a company or even an industry targeted by the tech giant, you know what we’re talking about.
This summer alone, we have seen rumors and news of Amazon’s expansions send stocks of competitors — and future competitors — in a downward spiral.
Shares of Ticketmaster parent LiveNation tumbled last week after Reuters reported that Amazon was looking at expanding its ticketing efforts in the U.S. In July, Zillow took a hit on rumors of Amazon’s expansion into real estate referrals, and online meal delivery service Blue Apron slumped shortly after its IPO on just a whiff of competition from Amazon.
And then there was the carnage in grocery stocks shortly after Amazon announced its $13.7 billion purchase of Whole Foods in June.
Amazon has revolutionized the retail industry, to the delight of some and scorn of others. It wreaked havoc on booksellers, and traditional retailers have struggled as Amazon has thrived. The company’s strategy of sacrificing short-term profits for long-term gains has allowed it to not only dominate online retail but also become king of the cloud and the early leader in the voice assistant market.
With the company’s technical expertise, customer base, Prime membership program, and willingness to experiment, it seems no industry is safe from Amazon. Below the chart, we look at five industry sectors that have been impacted just this summer by Amazon’s expansion plans, and in some cases by mere rumors of those plans.
Sears’ decision to team up with the great retail disrupter had a sense of “if you can’t beat ’em, join ’em,” but it has paid off for Sears. Following the announcement on July 20 that Sears would sell its line of Kenmore products on Amazon for the first time, the struggling retailer got a much needed stock bump.
Sears’ competitors, not so much. CNBC reported that Home Depot, Lowe’s, Whirlpool and Best Buy lost $12.5 billion in market value that day. Shares in those companies each fell at least 4 percent following the news of the Amazon-Sears detente.
Amazon shocked the world when it announced its biggest acquisition ever on June 16: $13.7 billion to buy Whole Foods Market. The news led to a chaotic morning on the internet and Wall Street, with investors scrambling to figure out how to react.
Shares of grocery competitors immediately cratered. Target dropped nearly 10 percent in early trading, Kroger sunk 14 percent, Costco slumped 6 percent and Walmart, which announced its own big acquisition that day, dropped 5 percent.
The two months following the Amazon-Whole Foods deal have been a mixed bag for traditional grocers. Walmart is the only one of the four above to see stock gains since the announcement, with its stock up 3 percent since then.
Target is down 0.36 percent in that period, Kroger stock dropped 4.8 percent over the last two months and Costco shares have plummeted 12.5 percent since the Amazon-Whole Foods acquisition was announced. Interestingly, as GeekWire reported today, privately-held grocery delivery startup Instacart is seeing its business boom as retailers reach to Amazon’s grocery effort.
Much uncertainty remains about how Amazon will deploy its largest acquisition. Will it leave Whole Foods alone? Will it automate the stores using Amazon Go technology? Will you be able to buy an Amazon Echo after grabbing a sandwich at the deli? All we know is the grocery industry is going to be a lot different now, and one expert thinks the only way to stop the Amazon-Whole Foods conglomerate is an alliance between competitors like Walmart and Costco.
While Amazon’s entrance into new markets can be a worrisome sign for fans of competitors, showgoers may welcome the retail giant’s expanding ticketing business and potential challenge to fee-happy Ticketmaster. The company launched a ticketing service called Amazon Tickets in the U.K. two years ago and is now looking to partner with U.S. arena owners as a way to sell event tickets, Reuters reported last week.
Ticketmaster parent company LiveNation’s stock opened up 13 percent on Aug. 10, thanks to a strong earnings report, but when the Reuters report dropped in the afternoon, the bottom fell out, turning those gains into a 3 percent loss before a bounce-back to end the day.
It would take a lot for Amazon to loosen Ticketmaster’s grip on the ticketing industry, but there is certainly opportunity if the company can address customer pain points like Ticketmaster’s fees and convince arena operators or league owners that it can provide a better service.
Poor Blue Apron. The meal-kit delivery company was already having a tough go of it as a public company, thanks in part to the Amazon-Whole Foods deal. Then on July 17 reports surfaced that Amazon was planning a meal-kit service of its own (and it turns out, had already started one), and Blue Apron shares went south faster than expired chicken.
Blue Apron shares sunk more than 11 percent on the day of the announcement. Its stock as a whole has dropped 46 percent since it went public in late June. Blue Apron’s first earnings report as a public company was a rough one, with the company dialing back revenue projections, reporting a loss of customers and deciding not to mention or acknowledge the challenge from Amazon.
This one is perhaps the best example of Amazon’s impact. The retail giant didn’t even introduce a new product, but a placeholder web page, which has since disappeared, prompted speculation that the company may be expanding into the real estate referral business — Seattle-based Zillow’s bread and butter.
When reports of the Amazon page surfaced July 12, Zillow’s stock price slumped from $46.15 a share to $44.54 that morning, ending the day down about 4 percent and showing just how closely investors watch Amazon.
I do think it is very difficult for horizontal players to compete with vertical companies that are focused on the vertical, and that have as big a brand as our family of brands have. And I do think it is important to understand how this ad product that we have differs from other ad products.
We sell an ad product that connects the consumer with a real estate professional at the time and place that they are shopping for a specific home. That is very different from Amazon’s rumored directory of real estate agents, or Facebook’s ad product that tries to drive traffic back to a brokerage web site. A lead generation product that’s tied to a home search is quite different, and I think will always be more attractive to an advertiser than a branding ad product or a product that tries to drive traffic to their web site.