The online retailer / real-life Death Star Amazon recently became the second US company to hit a trillion dollar valuation.
The first, Apple, got there by upending and partially devouring in turn the music industry, the mobile phone industry, and even the camera industry.
Amazon sometimes seems to be advancing by hitting everything Apple didn’t get around to.
There’s a reason why one author dubbed it The Everything Store!
In reality, as much as half the value of Amazon might be best chalked up to its cloud computing business, AWS. This has got little to do with selling the cheapest books, trainers, and garden equipment. Indeed AWS is mostly invisible to all but software developers, yet it supports many of the websites we visit every day.
Nevertheless it’s Amazon’s impact on our shopping habits – and the destruction it is said to have brought to our High Streets – that makes all the headlines.
One can argue whether the demise of a slew of retailers over the past few years – from Toys R Us to House of Fraser, Maplins to Borders – was really due to them being hit by the death rays of the US online behemoth.
Fashions change, after all. The UK High Street looked equally different in 1975 compared to 1995 – but there was no Amazon to point the finger at then.
They did it their way
On balance I agree with those who say online retail has permanently disrupted how we buy things, and that Amazon is both a prime mover and beneficiary.
But I also believe it’s not the only game in town – or even on the Internet.
Here are three UK-listed retailers that are flourishing in the Amazon era.
JD Sports Fashion PLC (LSE: JD)
Like a cocky young football team that doesn’t know it should be over-awed by the formidable opposition, £4.5bn JD Sports Fashion has been showing $1 trillion giant Amazon a clean pair of heels for years now. The sportswear retailer has tripled revenues over the past five years, in large part by building out from its UK home to establish a near-billion pound a year business in Europe. And while Amazon CEO Jeff Bezos probably won’t be losing any sleep just yet, JD’s recent acquisition of US athletic footwear firm Finish Line means it’s now taking the fight to the US juggernaut’s home turf. Online sales have been growing at a 30% clip, too – well above JD’s like-for-like in-store sales.
Hotel Chocolat (LSE: HOTC)
Jeff Bezos has talked gamely about Amazon doing airborne deliveries by drone to your back garden, but even if it succeeds it won’t be delivering deliciously thick mugs of hot chocolate any time soon. That should keep customers popping in to Hotel Chocolat’s 30-odd café-equipped stores – and as often leaving with a box of luxury chocolates under their arm for later. With total revenues growing 11% year-on-year, the rest of Hotel Chocolat’s 104 stores are clearly pulling their weight, too, helped by the fact that many are located in stations and other high traffic areas. (I can’t be the only person who always visits far-flung friends via a gift-stop to Hotel Chocolat?) Website sales are up 14% a year, meanwhile, and Hotel Chocolat has rebooted its strategically handy Tasting Club subscription service. Perhaps the greatest sign of its confidence is it has been experimenting with selling its chocolates via new third-party channels including… Amazon!
Ocado (LSE: OCDO)
Hotel Chocolat claims it was “Born Digital”, and that digital strategies have always been at the heart of its operations. Well, if that’s true of an up-market peddler of salted caramel chocolate penguins (grab me a bag!) then it’s surely true of the online grocer Ocado. Its cutting-edge approach to selling baked beans and bananas has long extended beyond a slick website and those delivery vans that are ubiquitous in London. Ocado’s fulfillment warehouses are famously automated, and it has also always made a big play of its logistics software. In recent years this promise has come good, with Ocado cutting deals to license its smarts to several other retailers – notably a massive deal with US giant Kroger that caused Ocado’s shares to leap 45% in May. In some ways this is a variation on how Amazon has used the same massive infrastructure required to run its website to spin-up its AWS cloud business; Ocado is doing a similar thing at the nuts-and-bolts end of online retail. Its shares look incredibly expensive, but then if it is a genuine Amazon rival, why shouldn’t they?
