E Is Amazon A Mind Reading Genie?

As "speculative" as this sounds it may be more a common sense approach than the fabled drones Amazon says it is exploring. It is not that different from the original thesis of FedEx, revolutionary at its inception, to use centralized hubs to ship items overnight.

Obviously, this works well for Amazon and some of its third party sellers but what will consumers think?

Yesterday, if not sooner

Consumers want the fastest shipping available. Yesterday, if possible.  Amazon's expedited shipping is truly remarkable as it pushes the envelope of same day shipping in some metropolises. 

Amazon, whose previous attitude to state sales taxes regulations was to take its presence and go, is now giving in and  its collection in states where it has a physical presence. Now  it's going along to get along as it spends ~$2 billion on warehouses and fulfillment centers across the country. The company has been on a hiring spree to staff those centers like it did over the holidays, totaling some 70,000 workers. Once again, Amazon holiday sales broke records, selling an astounding 426 items per second on Cyber Monday.

Finally, in 2012, Amazon bought Kiva Systems which gave them robotic efficiency in warehouse management. The robots, which resemble smiling orange Roombas, can move shelves of product over a warehouse with the abandon of a NYC cabdriver. Check out the YouTube video to see how they work.

Rivals disrupted

These Amazon shipping initiatives are going to challenge retailers, both online and bricks and mortar.  EBay (NASDAQ: EBAY) Marketplaces division has seen decelerating growth over the last few years and may see even worse performance although its GSI Commerce and PayPal divisions are on fire. EBay Power Sellers may defect to Amazon if they haven't already to the Fulfillment by Amazon program

Big box companies like Wal-Mart Stores (NYSE: WMT) and Target (NYSE: TGT)  have been working hard the last few years on their e-commerce divisions and omnichannel initiatives like in-store pickup and mobile shopping apps. These rivals are trading at exponentially lower trailing earnings multiples in the mid-teens compared to Amazon's 609.98 P/E.  Both Target and Wal-Mart offer yields, of 3.1% and 2.6%, respectively.

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Annalisa Kraft has no position in these companies.

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