Yahoo Finance’s Alexis Christoforous and Brian Sozzi preview Amazon Prime Day with Christian Magoon, Amplify ETFs CEO.
BRIAN SOZZI: The event is estimated to bring in nearly $10 billion in worldwide sales, according to eMarketer, as consumers rely heavily on e-commerce ahead of the 2020 holiday shopping season. Let's discuss what to expect with Amplify ETFs CEO Christian Magoon. Christian, always good to speak with you here.
So this event has moved. What do you think? How do you think it will perform, because it has in fact moved to October?
CHRISTIAN MAGOON: Yeah, Brian, I think it's a brilliant move by Amazon. I think they got forced into it due to COVID and supply chain issues. But this really positions them to get in and ahead of the holiday shopping season and it really kick it off here in October.
And if you look at all the consumer surveys, the majority of Americans now look like they're going to do their shopping online versus in-store. The CDC in fact has said, avoid crowded holiday shopping in-store. It's a high-risk activity. So Amazon kicking this off-- and I know Walmart and Target and others are going to pile on as well-- bodes well for kind of this holiday shopping season in the online channel.
ALEXIS CHRISTOFOROUS: Now, I want to talk more about that, because it's not just going to benefit Amazon. Right? Is there sort of this cascading effect, if you will, where people just start looking for deals online, and other retailers may actually really benefit from Amazon Day as well?
CHRISTIAN MAGOON: Yeah, that's right, Alexis. I mean, even in the summer when Prime Day traditionally happens, many other retailers benefited and had some of their best summer sales in June and July previously with Prime. So this is going to be a great coattail, if you will, that Amazon brings to the party here this week where brick-and-mortar stores that have online platforms will take advantage of.
And certainly, all the other online retailers-- the Wayfairs, the Etsys, even Peloton, Carvana-- you're going to see a lot of increased attention around getting great deals this time of the year. And that's all Amazon's fault, in a good way.
BRIAN SOZZI: Chris, let me push back on that one. So if Amazon does go on to in fact rack up $10 billion in sales worldwide because of Prime Day, that's $10 billion in sales that may not find the register for Macy's or die in JC Penney this holiday season. How does it impact companies that have been struggling into this year?
CHRISTIAN MAGOON: Yeah, the real losers are going to be these companies that don't have a viable or vibrant online retail sales business. And these are exactly those types of names, Brian, these kind of old-line brick-and-mortar retailers that have clunky websites that haven't really done well and COVID. This could be kind of another nail in their coffin, because it's really going to vacuum out a lot of these dollars from the marketplace.
And you know, it's not really surprising. I think it would happen one way or the other due to COVID and some of the physical restrictions. But this is going to accelerate some of the problems that brick-and-mortar retailers are already in.
ALEXIS CHRISTOFOROUS: What do you do as an investor with Amazon stock right now? Because it's had an incredible year, right Christian? Up 77%. But you say it's actually lagging the Amplify online retail ETF. I think people hear that and go, how can that be?
CHRISTIAN MAGOON: Yeah. It's funny, because when you look at online retail stocks, we have the largest online retail ETF that's equal weighted-- so not market cap weighted. It's the 10th-best performing ETF in the US this year, up 85%. And it's outperformed Amazon.
Well, when you look in the portfolio you see many of these names that are up well over 100% this year-- Wayfair, Etsy, Shopify, Peloton, Carvana, et cetera. Chegg. So Amazon has done well relative to the overall market this year, but not as good as kind of the average online retail stock. And certainly, that's been the case over the last two years, where you've seen the I Buy Online retail ETF outperform Amazon by over 20% over the last two years.
And that's partly because Amazon isn't as highly leveraged to online retail as they used to be. Remember, they have this physical footprint with Whole Foods that hasn't necessarily been performing well. They have their cloud computing business that takes them in different directions. And now they've got a little bit of overhang on this kind of antitrust investigation that's coming out of the House and maybe the FTC.
So it's going to be interesting to see, you know, will Amazon respond? Certainly today, we're seeing it respond, pre-Prime Day up nicely several percentage points as we do this interview. But you know, this isn't as pure of a play when it comes to online retail. And these smaller names that are more of a pure play have benefited more in this COVID economy this year, for sure.
BRIAN SOZZI: Christian, is Prime Day the catalyst that could send Amazon stock up another 25% before 2021? Sure, it's $10 billion potentially worldwide sales. But it also could mean more Prime members. More Prime members could mean more video sales. And really, it creates a whole flywheel of business for this company.
CHRISTIAN MAGOON: Yeah, that's right. You know, there's a reason why Walmart Plus is launching. And it's this subscription-based revenue that Amazon Prime has created, this membership revenue. The estimate is that 75% of all online shoppers will be Prime members by the end of the year.
When you look at Prime members, they tend to spend two times more in terms of their annual budget on Amazon, about $1,400, versus non-Prime members, which were around $600, estimates show. So this is a huge flywheel in terms of subscription revenue, and really kind of doubling their sales from this unique membership business. So for sure, Prime Day is ingenious. And it's going to continue to ramp up memberships and subscription revenue and increased sales.
But there's going to be other things that start to emerge like Walmart Plus that's going to start to compete. So it'll be interesting to see how much you can grow the business, because remember, it does have these other large businesses. And who knows, though? Maybe the retail business gets separated given this current focus on antitrust kind of legislation, or at least investigation into these technology companies. Amazon does have over 50% of US e-commerce by most estimates.