may have a tremendous network of distribution centers and other warehouse facilities, but there is one thing it lacks that competitors have: a fleet of stores.
Once seen as an anchor weighing down business, retailers like Walmart Inc.
and Target Corp.
and many others have turned their stores into fulfillment centers that can match Amazon’s speed in getting orders into customers’ hands.
“[W]hile Amazon can thrive off the back of its superior logistics network, it will also need to work hard against rivals which can use their store fleets to satisfy the immediacy and convenience that customers often crave,” wrote Neil Saunders, managing director at GlobalData Retail.
See: Jeff Bezos built Amazon into a monolith — but did it hurt American workers?
“The pandemic has heightened the use of such services and we do not believe their popularity will fade as we move into 2021. It is also true that Amazon has some work to do to improve its own omnichannel credentials; we lament the fact that neither Amazon Books nor Amazon 4 Star stores are properly linked to Amazon’s omnichannel ecosystem.”
Both Walmart and Target have talked extensively about how they’ve used their stores for services like in-store pickup and curbside delivery, which have gained importance during COVID-19 as shoppers looked for contactless ways to buy goods.
According to data from Adobe Inc.
orders using buy-online-pick-up-in-store (BOPIS) grew 40% year-over-year during holiday season 2020, with an average one in four orders placed using BOPIS when it’s offered.
Experts say use of these services will continue even after the pandemic is over.
Target said in its most recent earnings that it fulfilled 95% of holiday sales from its shops.
And Walmart just announced that it’s beefing up its local fulfillment capabilities with new facilities around the U.S.
Also: Target’s holiday sales show the importance of stores even as COVID-19 drives business online
And: Walmart adding dozens of automated local fulfillment centers to speed delivery and pickup orders
To be sure, Amazon has many of benefits working in its favor, with analysts upbeat that even with a record-breaking quarter under its belt, the e-commerce and cloud services giant has more growth to come.
“Business trends remain strong and should continue to do so in 2021,” wrote Susquehanna Financial Group analysts led by Shyam Patil.
“Ultimately, we see Amazon as a long-term secular grower whose leadership in its three key markets – e-commerce, cloud, and advertising – should emerge even stronger coming out of the pandemic.”
Amazon’s advertising business, which shows up as “other” in the company’s balance sheet, was up 66% in the fourth quarter.
Even if rivals have a ton of stores, Truist Securities highlights Amazon’s sky-high logistics standards.
“A stronger than expected holiday season for retail provided Amazon with the ideal opportunity to flex its superior e-commerce model, and achieve revenue growth not seen since 2011, with record profits,” wrote Truist analysts.
“We believe these gains will prove sticky post COVID-19, with aggressive infrastructure investments and product rollouts likely extending the company’s lead further.”
Truist rates Amazon stock buy with a $3,750 price target.
“We believe Amazon is well positioned as the market leader in e-commerce and public cloud, where the secular shifts remain early—U.S. e-commerce represents ~20% of adjusted retail sales, and we estimate ~15% of workloads are in the cloud today,” wrote JPMorgan in a note.
“Amazon is also starting to show more profit, with its high-growing AWS and advertising revenue streams also its most profitable.”
Amazon stock has gained nearly 66% over the past year. The Amplify Online Retail ETF
is up 150% for the period. And the S&P 500 index
has gained 18.1% for the period.