Displaying items by tag: Amazon
How Amazon plans to use Whole Foods as part of its broader strategy is becoming clearer today. The company has announced that it will begin to offer significant discounts on hundreds of products, in addition to special offers, for Amazon Prime members who shop at Whole Foods. The company already has great Prime penetration of Whole Foods shoppers (75%), but less than 20% of Amazon Prime members shop at Whole Foods. The perks are a way to lure more Prime members into Whole Foods. The company seems likely to use the increased sales to offset any cost rises to its Prime service.
FINSUM: This seems like a good idea as the move will feed both its Prime business and Whole Foods.
There have been a lot of fears over the supermarket sector over the last couple years. Especially since Amazon’s acquisition of Whole Foods last year, investors have been shy about grocery stocks and how that model may be disrupted. This has led to some steep discounts, but perhaps none is more attractive than Kroger. Despite fears, the grocer seems to have a solid position in the market, especially given that supermarkets are still consumers’ favorite channel. One market analyst says that “People are overly concerned about Amazon and groceries … The industry has faced disruption for 25 years, with companies like Costco Wholesale (COST) and Trader Joe’s, and it has been positive for Kroger. Disruption stirs things up and creates opportunities”. Kroger is currently the number two grocer in the US.
FINSUM: One of the very interesting things to note is that Amazon is now scaling back its grocery delivery business as consumers have not liked it as much as the click and collect services of Walmart and Kroger. Has grocery delivery died before it really began? Good news for traditional grocers.
One of the elements that has been weighing on technology companies this spring has been the threat of regulations. To judge that risk, Barron’s interviewed a number of Wall Street Analysts to get their views. Overall, the consensus was that future regulatory risk for fangs was muted. One managing director for Canacord Genuity commented that, “Facebook management addressed important data and privacy issues head-on, outlining new disclosure standards for political ads and hiring aggressively against privacy initiatives.…For the time being, the worst is very likely behind Facebook stock.”
FINSUM: We tend to agree here. We do not see the government taking major action, and the worst seems to be behind tech companies, for now.
Anyone in Amazon should be a little bit nervous today. While the stock’s performance should speak for itself, we think an announcement by the company could be a risk factor. Amazon has announced that it is increasing the price of its Prime service from $99 to $119, or a 20% rise. The company has not raised the price since 2014, but the changes will come into effect next month. Amazon notes that it has greatly expanded the services included in Prime, including bringing the total items covered by Prime to over 100m.
FINSUM: How much might this keep new subscribers from joining? Going over the $100 mark seems like an important mental threshold. The price hike appears to indicate Amazon needs more revenue to invest in another big venture.
Go back a few years and the big fear of the wealth management market was robo advisors, especially upstarts like Betterment and Wealthfront. Fast forward to 2018 and fears of robos have largely receded as they seem to have found their niche in the industry alongside human advisors. Now the big worry is about large tech companies pushing into wealth and asset management. The anxiety most commonly manifests in worrying that Amazon might launch a digital wealth management platform of its own. However, Charles Schwab’s CEO just sent out a warning to the FANGS, saying that “If you’re a FAANG-type company and you decide you want to come into our space in a manner consistent with the way we operate, you will invite the Federal Reserve into every single thing you do”.
FINSUM: It is true that if the FANGS were to become full-fledged financial service providers they would suddenly be subject to much stricter regulations. It could be an obstacle that holds them off, at least for a while.