Amazon's (AMZN) E-commerce Lead Threatened By New Entrants
The e-commerce sector continues to grow driven by rapid proliferation of smartphones and internet globally. Notably, these two factors are strengthening online retail shopping, bolstering the adoption rate of online payment solutions and driving m-commerce growth.
Additionally, emerging markets like China, India and most importantly Latin American economies are witnessing rapid adoption of e-commerce technology. This is a key catalyst for the booming e-commerce market which as per a report from Statista, is expected to generate revenues worth $2.03 trillion in 2019.
Further, the report suggests that revenues are anticipated to hit $2.85 trillion by 2023, witnessing a CAGR of 8.9% between 2019 and 2023. User penetration in the market for 2019 is pegged at 51% and is likely to reach 58.5% by 2023.
Consequently, big retailers like Walmart WMT, Costco Wholesale COST and Target TGT as well as online payment solutions provider PayPal PYPL are focusing on developing their footprint in the e-commerce space. However, this is increasing competition for Amazon AMZN, which is the incumbent in this market.
Retailers Challenging Amazon’s E-Commerce Dominance
Retailers like Walmart have realized the importance of e-commerce. The company is continuously revamping its initiatives to bolster footprint in the global e-commerce space. Last year, it completed the buyout of majority stake in India’s online retail giant, Flipkart.
Further, Walmart has teamed up with Rakuten to inaugurate its first e-commerce store in Japan. Further, the company owns 12% stake in JD.com and has recently strengthened its alliance with the latter by investing $500 million in Chinese online grocery delivery company, Dada-JD Daojia.
Apart from these, Walmart is leaving no stone unturned to strengthen its delivery services. It acquired Parcel and extended partnership with Deliv to support its same day delivery initiative. Further, it introduced a last-mile delivery pilot – Spark Delivery — in an attempt to expand its grocery delivery services across 100 metro areas in the United States.
Further, this Zacks Rank #2 (Buy) company offers grocery pick-up and delivery services at 2,100 locations and 800 locations, respectively. Further, it is gearing up to offer pick-up service at 3,100 locations and delivery service at 1,600 locations by 2020.
Walmart Inc. Revenue (TTM)
Walmart Inc. Revenue (TTM) | Walmart Inc. Quote
Target like Walmart also offers online shopping facility via its e-commerce platform. Further, its omni-channel discount, savings and reward program remains a major positive. The program helps the customers to earn reward points and save money while shopping offline as well as online just by downloading Target app.
Additionally, the company also offers free pick-up and delivery services along with two-day shipment facility to deliver enhanced shopping experience. Further, the company offers same day delivery services in U.S. states like Montana, Maine and New York, especially in the greater New York City.
Furthermore, its Shipt buyout is adding strength to its same day delivery services while Grand Junction acquisition continues to improve its delivery services.
Currently, Target carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Target Corporation Revenue (TTM)
Target Corporation Revenue (TTM) | Target Corporation Quote
Costco Wholesale which is a retail wholesaler is also expanding its e-commerce footprint in the United States as well as in international regions like Mexico, Korea, Canada and the U.K. The company which carries a Zacks Rank #2 also offers two-day and same day grocery delivery services to customers.
Costco Wholesale Corporation Revenue (TTM)
Costco Wholesale Corporation Revenue (TTM) | Costco Wholesale Corporation Quote
The competition is intensifying further as PayPal has entered into a definitive agreement to invest $750 million in MercadoLibre MELI, one of the largest e-commerce players in Latin America.
With the deal, both the companies are aiming to expand their reach in e-commerce as well as online payment markets. This presents a significant threat for Amazon. Moreover, this collaboration is likely to help MercadoLibre, which carries a Zacks Rank #3 (Hold), in strengthening its logistics infrastructure and invest in end-to-end payment solutions.
PayPal Holdings, Inc. Revenue (TTM)
PayPal Holdings, Inc. Revenue (TTM) | PayPal Holdings, Inc. Quote
Amazon’s Aggressive Stance
Amazon’s aggressive retail strategies, expanding seller base, distribution strength, strategic acquisitions and partnerships are likely to continue aiding its dominance in the e-commerce market.
Further, Amazon’s strong focus toward advancement of Prime services with the help of customer-oriented benefits and savings, expanding grocery delivery and pick-up services, and growing movie and video content portfolio remains a key growth driver.
Apart from this, the company introduced an advanced and convenient method of delivery of packages for Prime members. It has launched Amazon Day which can be selected as any day in a week on which Prime users can get all of their orders delivered together in fewer packages.
Moreover, its robust same-day and two-hour delivery services are helping it to gain momentum across customers. Further, Amazon took the delivery of its 40th Boeing 767 cargo plane in an attempt to strengthen its two-day shipment facilities.
Additionally, its expanding global footprint is aiding online retail business growth. Recently, the company initiated direct sales of merchandise by establishing in-house fulfilment and delivery network in Brazil. Further, the company sells fashion and athletic apparel in Brazil via its Brazilian marketplace since mid-2018.
Further, the company is in talks with Casino to acquire the latter’s Via Varejo SA unit, the third-largest e-commerce platform operating in Brazil. These initiatives in Brazil will continue to pose serious competitive threat to MercadoLibre.
Furthermore, this Zacks Rank #3 company has strong presence in the e-commerce space of India. It is also in talks about merging its China business with Kaola, a Chinese e-commerce firm owned by NetEase to bolster presence in Chinese e-commerce space.
Amazon.com, Inc. Revenue (TTM)
Amazon.com, Inc. Revenue (TTM) | Amazon.com, Inc. Quote
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MercadoLibre, Inc. (MELI) : Free Stock Analysis Report
Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
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Target Corporation (TGT) : Free Stock Analysis Report
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