Over the past two decades, Amazon (AMZN) has been at the forefront of the shopping revolution. It has grown to be the ecommerce behemoth it is today by ushering in the online retail era, in the process making physical shopping almost obsolete. Well, if it hasn’t quite managed to completely decimate physical shopping via its online offerings, its next step in the path to world domination involves… opening its own physical locations.
Going by recent media reports, Amazon is planning on setting up brick-and-mortar retail outlets, basically its own department stores, with the shelves stacked with merchandise from its own private label.
While it sounds like a surprise for a company so strongly associated with ecommerce, Amazon has already been dipping its rather large toes into the physical realm. First with a bookstore in Seattle in 2015, followed by its largest purchase to date, the 2017 acquisition of Whole Foods Market and its attendant 460+ stores (now over 500). There are also 20 Amazon Go cashier-less convenience stores, over 30 Amazon 4-Star stores, more than 20 Amazon Books stores, over a dozen Amazon Fresh grocery stores, and a number of Amazon Pop Up stores.
“So, Amazon has been expanding into physical retail in several different ways and for some time now,” says Evercore’s Mark Mahaney. “With that as context, this reported move into a large department store format shouldn’t be a surprise.”
But is it a good move? Mahaney thinks this “multichannel strategy” is a way for Amazon to “expand its growth opportunities, to further build out its customer base, and to provide more ways to serve its existing customer base.” Essentially expand market share beyond the online capabilities. Amazon’s main objective behind these initiatives is to offer a retail solution that is better and differentiated than what currently exists, says the analyst. By offering consumers “greater convenience, better selection, better prices, and overall better experiences,” current physical retail concepts can be improved upon. And Mahaney thinks that given past performance Amazon is well-equipped to do just that.
Therefore, Amazon should be “reasonably successful with these physical store concepts.”
“Amazon has a remarkable – tho far from perfect – track record of innovation, from the Online shopping ‘thing,’ to Cloud Computing, to eReader devices, to cashierless-store technology, etc,” the 5-star analyst summed up.
To this end, Mahaney reiterated a Buy rating on AMZN shares along with a $4,200 price target. Investors are looking at upside of 31% from current levels. (To watch Mahaney’s track record, click here)
Amazon stock is that rare beast with a plethora of Buy ratings only – 30, in total – adding up to a Strong Buy consensus rating. The average target is just slightly higher than Mahaney’s, and at $4,214.13, offers upside of ~28% in the year ahead. (See Amazon stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
