By Samuel Taube
On this week’s episode of Forward Guidance, Matthew Carr, Editor of The VIPER Alert, joins us again to discuss the future of retail.
We start our conversation by discussing the recent tumble in Blue Apron (NYSE: APRN) stock. Just weeks after its IPO, the stock hit an all-time low after Amazon (Nasdaq: AMZN) registered a meal-kit-related trademark.
Matthew doesn’t see the sell-off as an overreaction. He also points out that Blue Apron’s problems extend beyond Amazon becoming its competitor. Its shares IPO’d at a much lower price than investors expected, as the company has struggled to fend off competition from more than 100 other meal-kit services. Amazon simply adds to that problem.
He also points out that meal-kit services cater to very specific demographic niches. They’re appealing for some millennials, busy upper-middle-class households and single men. But for the average American family, they’re not cost-effective.
In Matthew’s view, Blue Apron could have fared better if it had used a multi-franchise model like Expedia (Nasdaq: EXPE) or Match Group (Nasdaq: MTCH) have. These companies own multiple services within the same industry (travel and online dating, respectively). Their subsidiaries cater to different niches and compete internally.
Amazon employs a similar business model by selling goods from multiple competing manufacturers.
I then ask Matthew what he thinks Amazon’s “master plan” is in the food space. He believes it is trying to attain dominance in the online, cashless food retail space. It has used a multifaceted approach to this objective.
Last year, it launched Amazon Go, a cashier-free grocery store where customers pay automatically with their phones. It also pioneered online grocery delivery services through its AmazonFresh subsidiary. And most recently, it acquired Whole Foods, one of the first grocers to accept mobile payments.
Next, I ask Matthew what other retail niches are vulnerable to Amazon. His answer is simple: all of them.
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However, he’s quick to point out that Amazon is technically a services company – not a retail company. This kind of paradoxical business model is common in today’s economy. Matthew notes that Airbnb, one of the largest hospitality companies in the world, owns no property. Similarly, Uber, the world’s largest transportation company, owns almost no vehicles.
In the same way, although Amazon sells millions of products, it does not manufacture much inventory. Instead, it makes most of its money from retail and logistics services like Fulfillment by Amazon and Amazon Fulfillment Web Service.
In Matthew’s view, major retail companies can compete with Amazon if they use or mimic its business model. China’s Vipshop (NYSE: VIPS) is a good example. Matthew recommended it in his VIPER Alert service.
The e-commerce retailer specializes in flash sales featuring luxury brands like Giorgio Armani and Louis Vuitton. Like Amazon, it simply provides retail services. It doesn’t actually manufacture and sell its own goods. And it has experienced annual revenue growth of more than 30%.
For more recommendations of fast-growing, Amazon-proof companies, check out Matthew’s VIPER Alert service.
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Source:: Investment You
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