Predicting and reacting to consumer sentiment about holiday shopping is big business, for retailers and for investors who buy retail stocks. Amazon.com Inc. (NASDAQ:AMZND) is quickly becoming a top place for holiday shopping. It has a clear impact on other stores and they are fighting back.
Whether other retailers can successfully fend off the Amazon effect remains to be seen. Meanwhile billions of dollars are at stake, not to mention the shopping lists of millions of consumers.
Online Not In Line
According to a September study by NPD Group Inc., Amazon was the top preference for places to begin shopping for the holiday. Anecdotal evidence suggests many people have shopping fatigue long before actual shopping begins. The NPD study indicated that 41% of respondents said they would rather spend time with family than shop in stores.
Many of these people said they planned to spend their shopping dollars online on Cyber Monday instead of standing in line on Black Friday. Part of the reason is price. Amazon cares more about sales than profits and people know it. Another big reason for the move to online is convenience. It is quite simply easier to click and wait for a package to arrive than to get in the car, drive to the mall, fight the crowds and sometimes come home empty-handed if the item you want is not in stock.
Retailers Fight Back
Some retailers like Best Buy Co. Inc. (NYSE:BBYA) began offering Black Friday deals in November, well ahead of the actual day in hopes of driving sales ahead of the most competitive shopping day of the year. Target Corp. (NYSE:TGTB) cut prices on thousands of items, a move that helped the company rebound over the past two quarters. The company is avoiding up and down sales in favor of what it calls “pricing right” in the first place.
Wal-Mart Stores Inc. (NYSE:WMTC) has rolled out a new online system that sometimes features slightly higher online prices. According to the company this results from items that are otherwise unprofitable to ship. Some critics has suggested the move is designed to encourage people to go to the stores where they are subject to impulse buying.
Stock Is Up
While many retailers seem to be offering almost identical deals on desired items, some products come with no discounts. For example, the Nintendo Switch Console costs $299 just about everywhere, with no discount. The substantial change is that there should be plenty of stock, so shoppers won’t be fighting over the last item in the store.
The main discounted item seems to be TVs with several chains selling 55” 4K HDTVs for under $300. Of course, the more discounted an item is, the more in demand it will be, and the faster stock will disappear.
Amazon AnswersAmazon has not ignored the competition. Amazon and other online retailers have started a practice of opening pop-up stores to showcase their offerings in retail locations. In the case of Amazon, the pop-ups are appearing at – wait for it – company-owned Whole Foods locations.
In those stores with Amazon pop-ups, Amazon devices like Kindles, Echos, Fire TVs and tablets, are being offered along with fresh produce and organic beef. This year Amazon is doing this in only 5 stores nationwide. If it is successful, expect many more pop-ups in years to come.