MarketWatch
From Target Corp. and Kohl’s Corp. to Best Buy Co. and Bed, Bath & Beyond Inc., retailers are facing increased risk of losing share to online retail giant Amazon.com Inc., a study showed Monday.
William Blair & Co. analyst Mark Miller picked a total of 2,400 items -- 100 items for each of the 24 retailers studied, 22 of which had physical stores -- and compared merchandise overlap and relative pricing against Amazon.
On average, Amazon was found to have an 11% price discount advantage on each item. The discount increased with the number of items purchased because of the savings earned on shipping, the survey showed, adding that Amazon has a bigger pricing advantage on items over $20.
Nearly half of physical store items are available on Amazon with third-party sellers representing more than 60% of the online retailer’s offerings.
Despite increased attempts by states to collect online sales taxes, the study showed Amazon will still come out ahead. For instance, while Amazon is priced lower on 56% of items including tax savings, it’s still priced lower on 48% of items when tax savings benefits are excluded, the report said.
Overall, the study showed retailers with above-average risk of share loss against Amazon include electronics retailers Hhgregg, Best Buy, home-furnishings chain Bed, Bath & Beyond Inc., discounter Target Corp., sporting goods retailer Dick’s Sporting Goods, mid-priced department store operator Kohl’s Corp. and pet medicine seller PetMed Express Inc.
The world’s largest retailer Wal-Mart Stores Inc. is placed at medium risk because it doesn’t overlap with Amazon in the perishables department, and the online retailer tends to be less competitive on lower-ticket items, the study found.
But the study also found Wal-Mart isn’t considered at low risk against Amazon because of the relative inconvenience of shopping at a huge supercenter store versus clicking away online.
Miller cut his ratings on Hhgregg and pet-medicine seller PetMed Express, sending shares of Hhgregg lower by 4.6%. PetMed dropped 3.9%. Best Buy was down 1.5%. Target and Bed, Bath & Beyond each declined 1.1%. See related retail stocks story.
In a closer look at Hhgregg Inc., for instance, 74% of the retailer’s 100 items selected are sold on Amazon.com, which has the second-highest assortment overlap among Miller’s coverage list. On those identical items, average per-item savings at Amazon.com were more than $80, the highest within his coverage, which represents more than a 12% per-item savings relative to the comparable in-store price, he said.
“The price-comparison risk for Hhgregg is a particularly high concern because of the high average ticket, and 84% of the overlapping items are available at lower prices,” the analyst said.
He said while the company’s aggressive approach in matching Amazon’s prices upon consumer request could slow the dollar share loss, it could also hurt its profit margins over time as price-check apps and mobile e-commerce become more prevalent, the analyst noted.
Hhgregg’s larger rival, Best Buy, has 69% of product overlapping with Amazon, which has a roughly 12% price discount advantage on identical items. Kohl’s and Bed, Bath & Beyond each has 60% and 55% of product overlap with Amazon having per-item price discount advantage of about 20% each. See related story on Best Buy’s most recent earnings report
Target has a 45% product overlapping with an 11% price gap against Amazon. Wal-Mart has a 28% assortment overlapping with Amazon priced 5.4% lower on those identical items, the report said.
Among retailers facing below-average risk of share loss against Amazon include Blue Nile, Whole Foods, Family Dollar Stores Inc., Dollar General Corp., CVS Caremark Corp., Walgreens and TJX Cos., the report said.
The study also found that retailers themselves have “divergent” online commerce strategies and are often “playing defense” with pricing on their websites often not price competitive with their own stores because of high shipping costs.
For instance, about 72% of items from those with physical stores are available on the companies’ websites with their online per-item pricing about 14% higher than their store pricing after factoring in shipping and other costs, the data showed.