Will Amazon Inherit the World?


I recently blogged that the Internet, or more broadly the technology revolution that is changing the way we live and work, is likely contributing to our recession. You can read that post here: Is the Internet to Blame for the Recession?

Today, I saw Amazon: Now One Third of all US E-Commerce.

(AMZN) could be responsible for close to a third of all U.S. e-commerce transactions, RBC Capital analyst Stephen Ju asserted in a research note this morning. Ju notes that Amazon’s reported revenues consist of a mix of gross revenues from its own businesses plus net third-party commissions. To date, he notes, Amazon has not given a break down of the two numbers, other than as a percentage of units shipped. The question, he says, is how much third-party gross merchandise value is flowing through Amazon’s platform – and what slice of all e-commerce Amazon is actually facilitating.

Performing a “gross-up” analysis, he concludes that “AMZN may be facilitating close to a third of all e-commerce in the U.S.,” and that it continues to gain share here. He also sees opportunity for further gains in international online retailing.

Actually, Ju’s data suggests the total slice of U.S. e-commerce through Amazon was about 34% in Q4, up from 27% a year earlier.

Ju this morning repeated his Outperform rating on the stock, and upped his price target to $84, from $72. He also upped his 2009 EPS estimate to $2.13, from $1.99.

In early trading, AMZN is down 82 cents, at $78.12.

I honestly don’t understand how retailers will continue to survive, outside clothing and food. Yes, there is always those that need to see things before they buy things; but many of these folks see locally and then buy online. The remaining folks that do buy in the stores are diminishing. The compromise required on price, selection, and opening hours is becoming too great. The online customer service experience is also increasingly hard to beat. I shared before that my wife bought shoes for the kids at Zappos- while at the local shoe store out of stock of the desired size. She scanned the barcode in the store on her phone and ordered online for the same price (actually cheaper since it was tax free and free shipping). That was at least 6 months ago, and we haven’t been back to the store since.

Nor is this iShift limited to retail. In my post, I wrote about the impact the DVR is having on television, but I later read a far more in-depth article in the Atlantic Journal on the same subject. In The Future is Cheese, the article suggests that prime time television may end up being targeted for “saps and morons” with low cost reality shows for those who can’t figure how to work a DVR. The cost of scripted shows, such as Heroes, may go the way of the dodo as the networks fill their time with low cost or sponsored programming. The economics and risks associated with scripted shows are relatively becoming too risky.

Since we now digitize just about everything –photos, books, movies, news, etc. the established models are crumbling. I am not sure we thought this one through – as our cherished publishers and content creators go out of business along with our retailers. But at least we will have lots of prime space available for businesses immune to the Internet – barbershops, bakeries, and shipping stores.


Dave Michels