Today I'd like to share my thoughts on AMZN with all of you. DLJ upgraded AMZN target price to $280 per share and I think this is a very bad call by DLJ and when AMZN crashes, it will crash badly.
As you can see that I have hardly any online retail stocks in my top 10 picks and there's a reason why. I do not believe in online retail stocks especially the "department store" type of retail stock such as AMZN as it positions to carry books, cds and other items.
The trend of online retailing is gearing towards manufactures and consumers not department stores and consumers. In the past, it was difficult to get goods directly from the manufactures but since internet, manufactures are busy setting up their own web pages and sell directly to the customers.
Much like the story that consumers will buy computers from DELL and not Circuit City, book publishers will sell their books directly to the consumers, Warner Record will sell directly to the consumers. Why bother buy from Sears, when you can buy appliance directly with the manufactures such as Whirpool and Frigiair?
It is true that this process is still in its early stage, but this is how is going to end up. In the end, middlemen such as these "department stores" will be the dinosaurs, either they are online or offline.
Why should you buy Levi's jeans from Macy's web page when you can buy directly from Levi's web page?
The end result is cost saving. Much like the trend in retail today. Outlet centers where the manufactures are setting up their own stores are beating out the retail stores. The only disadvantage is the travel distance. Since these outlet stores are sometimes out of the way, the competition between outlet and department store is somewhat abated.
However, when it comes to online, nobody needs to travel far to get the bargain. And in the end, manufacture to consumer will result in two things: bigger profit margin for the manufactures and lower prices for the consumers.... without a middleman.... in this case.... the online department stores.
We shall see how long these online department stores will survive. |
