Retailers' Growing Retaliation Against Amazon
Tony is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
The conflict between traditional bricks-and-mortar retailers and online retailing giant Amazon.com (NASDAQ: AMZN) is becoming more and more heated. Traditional retailers' dislike of Amazon stems from a number of reasons, from a lack of sales tax paid (although that is slowly changing) to being used a physical “showroom” for buyers on Amazon. A relatively new tactic employed by traditional retailers in their battle against Amazon is refusing to sell Amazon products, whether they be books or the company's Kindle tablets and e-readers.
The latest salvo was fired by the world's largest retailer, Wal-Mart Stores (NYSE: WMT), which is trying to expand its own online presence. It will no longer sell Amazon's Kindle e-readers or tablets. This will be a blow to Amazon, particularly with the holiday season fast approaching. It recently launched its upgraded Kindle Fire HD tablet in an effort to compete with Apple's iPad. Wal-Mart will continue selling iPads in its stores in addition to tablets from Samsung, Google and Sony.
Wal-Mart is hardly alone among bricks-and-mortar retailers in taking actions against the online retail giant. In May, Target (NYSE: TGT) also said it would stop selling all Kindle products, after carrying them on its shelves for two years. It is still selling the iPad and the Nook from Barnes and Noble (NYSE: BKS), among a number of tablets and e-readers on its shelves.
Both major retailers, Wal-Mart and Target, have grown increasingly fearful of Amazon devices such as the Kindle Fire. These gadgets have intensified the threat to Wal-Mart and Target, since the Kindle is now a very quick and easy route to buying other products on Amazon's site for users.
Other companies in the retail space are also retaliating against Amazon. The aforementioned Barnes and Noble, in February, said it would no longer sell any printed books published by Amazon, whose nascent publishing arm has moved aggressively to gain a foothold in the industry. Barnes & Noble and other book retail chains object to Amazon's exclusive deals with authors, which prevent other retailers, such as Barnes & Noble, from selling digital versions of the books. This obviously may hurt sales of the Nook.
Do not be surprised if other bricks-and-mortar retailers soon join the rush to stop selling Amazon merchandise. Among them may be the world's largest electronics retailer Best Buy (NYSE: BBY), which still does sell Kindles. This company may be teetering on the brink, and it's been hurt perhaps more than any other retailer by the practice of “showrooming”, where consumers view a product in store before going to Amazon to buy it. Perhaps as a result, Best Buy has been the subject of leveraged buyout talk ... not surprising, since the stock is down about two-thirds in value in the last five years.
Eventually, these attacks by traditional retailers may have an effect on Amazon, whose operating margins are already tight at less than 2% last year. Having to pay sales tax online may also slow down Amazon's gains in past years against the traditional retailers. But it is still too soon to bet against Amazon.
If you’re an investor in retail stocks, you have to look at Amazon.com, the company intent on disrupting the entire sector. Whether you’re researching Amazon itself or one of the companies it's taking sales from, you need to understand the company and its prospects. That's why the Fool has created a new premium report on Amazon, sharing everything investors must know. The report also has you covered with a full year of updates, so click here now to get started.
tdalmoe has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. 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.If you have questions about this post or the Fool’s blog network, click here for information.