Amazon Poised to Take Out Rivals in Another Industry
Chris is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Over the last 10 years, Amazon.com (NASDAQ: AMZN) has taken on large and small companies in various industries. The e-commerce leader has competed against Wal-Mart, GameStop, and Barnes & Noble with great success. Amazon is now entering a market where it can help some retailers and possibly take out another.
Amazon announced its launch of Look.com, a clothing website for kids between the ages of newborn to 14 years old. The company promises: “At Look.com, we’ll help outfit your kid in clothes you love, in clothes they love -- without all the dressing room drama.”
In this press release, Amazon is literally telling parents to stop buying children’s clothes at shopping malls and to instead utilize another category-killer from the e-retailer.
Look.com is the latest product of from Quidsi Solutions, the parent company of Diapers.com, Casa.com, Soap.com, Vine.com, Afterschool.com, bookworm.com, wag.com, beautybar.com, and Yaya.com.
Amazon acquired Quidsi in November 2010 when the company had only three websites (Diapers.com, Soap.com, Beautybar.com). Amazon paid $500 million in cash and $45 million in debt to acquire the e-commerce business.
With the existing Diapers.com, which is for diapers and baby supplies, and Yoyo.com, for children’s toys, the launch of Look.com, shouldn’t come as a huge surprise. However, if you’re a children’s retailer like Children’s Place Retail Stores (NASDAQ: PLCE), you might be scared.
Look has 40,000 items and more than 150 brands represented, providing a one-stop shop online for parents. It will be hard for Children’s Place to compete with this selection and pricing. Look also provides a 365-day guarantee and no-hassle return policy, something a mall retailer simply can’t compete with.
Children’s Place -- The loser
Children’s Place just reported record sales of $1.8 billion for fiscal 2012. Those results, which were up 5.5%, included an entire extra week. The record will also be hard to surpass with declining store counts and increased competition from Amazon.
In the fourth quarter, Children’s Place opened four stores and closed 11 locations. The company ended the fiscal year with 1,095 retail locations. If I was a shareholder in Children’s Place, I would consider selling my shares instead of taking on the Internet giant.
The launch of Look.com is not completely negative to the children’s clothing market. Amazon has announced that key brands including Carter’s (NYSE: CRI), Osh Kosh B’gosh, Converse, Keds, Columbia Sportswear, Crocs, True Religion, Splendid, and Calvin Klein will be among the 150 brands for sale on its website. Look will also feature designer and hot new companies that offer children’s clothing.
Carter’s -- The winner
Carter’s could be the big winner from Amazon’s new offering. The company, which owns the Carter’s and Osh Kosh B’gosh brands, has more than 600 retail stores. Carter’s will offer its clothes on Amazon’s Look.com site, continuing its partnership with large retail brands. Carter’s offers its Child of Mine brand exclusive at Wal-Mart and the brands Genuine Kids, Just One You, and Precious Firsts at Target.
In the fourth quarter, the Carter's brand sales were up 16.9% to $517 million, while the Osh Kosh B’gosh brand saw sales decline 2.3% to $107.4 million. The kids' retailer also ended the quarter with 413 Carter’s brand stores and 168 Osh Kosh B’gosh stores.
One of the bright points for Carter’s was its international sales. International sales increased 19.5% to $64.9 million for the fourth quarter. The company has a strong presence in Canada with 82 retail outlets and Japan through partnerships. The inclusion of Carter’s brands on Look.com could help the company’s international expansion and brand awareness further.
I wrote in January 2012 about Amazon’s entry into sporting goods and home furnishings and how it might hurt several retailers. The same can be said for Look.com and its impact on retailers.
Amazon, with a market capitalization of $124 billion, will not see a huge increase in sales from the newest website offering. However, for Children’s Place and Carter’s, the introduction of the website is definitely something to be aware of.
Chris Katje has no position in any stocks mentioned. The Motley Fool recommends Amazon.com. The Motley Fool owns shares of Amazon.com. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!