To the extent that traditional retailers and their landlords fear the encroachment of online retail sales platforms on their business, they are terrified of Amazon.com Inc., whose name has become synonymous with disruption and e-commerce.
But brick-and-mortar retailers should take heart that the e-retailers' bark, at least so far, is bigger than its bite, according to Nick Egelanian, president of retail real estate consulting firm SiteWorks Retail Real Estate Services.
In a presentation at the International Council of Shopping Centers' RECon event this week in Las Vegas, Egelanian praised Amazon's achievements but made a case for optimism in the face of its advance. Amazon dominates e-commerce, but a significant part of its business is contract fulfillment, meaning it only ships a product for which third parties shoulder the risk of ownership and interest carry. SiteWorks estimates that Amazon executes roughly $50 billion in actual retail sales a year in the U.S. — sales of products for which it assumes the inventory, style and other risks — or less than 1% of overall U.S. retail sales.
Amazon is "a very special company," he said. "They just don't make a lot of money, and they're not having the impact on retail that people think they're having."
Instead, retailers should focus more on the players that dominate the big-box space, including Walmart Inc. and Costco Wholesale Corp., Egelanian said.
Egelanian walked through several possible reasons as to why Amazon may have bought Whole Foods Market Inc.: to serve as a brick-and-mortar location for their storage lockers and cut back shipping costs; as a first step into "food technology"; to enhance its relationship with customers; to grow and leverage its Amazon Prime membership base, or simply to widen its reach.
He thinks it is likely that Amazon intends to leverage the information it gathers, via its legacy operations and now Whole Foods, and sell data the same way Google Inc. and Facebook Inc. do. He also thinks it is possible that Amazon.com will become a "serious" brick-and-mortar player in its own right.
"We'll see," he said.
