“It’s a bad day… It’s like losing a family.”
Cheryl Crimmins wiped away tears. The Borders bookstore where she was an assistant manager for 12 years had shut its doors for good.
Stories like Cheryl’s are unfolding across the country… That’s because brick-and-mortar retailers are closing at record pace.
Research firm Credit Suisse predicts there will be 8,640 store closures this year.
That’s quadruple the number of store closures from 2016. And 2,500 higher than the closures during the Great Recession of 2008.
There’s a term for this trend in store closures: “Amazon’d.”
It’s a steamroller that will soon make Amazon the largest retailer on the planet.
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Since the turn of the century, the e-commerce giant has been pushing traditional retailers towards extinction with its ultra-low prices.
One of the first casualties was electronics retailer Circuit City. It lost sales to Amazon and filed for bankruptcy in 2008.
Borders was next. It couldn’t stop the juggernaut, either, and filed for bankruptcy in 2011.
They’re not the only ones who couldn’t compete with Amazon.
Mall stalwarts like JCPenney, Sears, and Macy’s may soon find themselves in the dustbin of history.
But Amazon isn’t resting on its laurels. It has its sights set on a far bigger prize.
If Amazon conquers this market, it will become the first $1 trillion company in the United States… and likely the most powerful company on the planet.
If you want to profit from this trend, you’ll hop aboard the Amazon steamroller… or at least avoid companies that will be Amazon’d.
Amazon’s Next Target
As we told you on Tuesday, platform companies like Amazon are changing the face of business. It’s our latest big idea to help you get a little bit richer every day.
These companies thrive because they don’t have to sell goods or services. They simply create spaces where people can connect and make transactions.
This model has completely upended the retail sector. And it’s key to Amazon’s success.
But the retail market is chump change compared to the big prize Amazon is after.
The newest target is the business-to-business (B2B) distribution market. This is where businesses sell products and services to other businesses.
At $6 trillion, the B2B distribution market is twice the size of the retail market. And it’s ripe for the taking…
Say Goodbye to the Middleman
Businesses need to buy a range of products to operate.
For example, they need office supplies, hardware, software, food, cleaning supplies, industrial equipment, uniforms, furniture, building materials, etc.
Generally, wholesalers—the middlemen—buy from producers and then sell these products to businesses.
But this market is fragmented. There is no single place where businesses can go to for all their needs.
If Amazon can build a centralized B2B platform on top of its already existing retail platform… it could create a one-stop shop for businesses. Just like it did for individuals.
And that would make shopping more efficient and much cheaper for businesses.
Just think about it…
One day, your business will be able to buy copy paper, computers, uniforms, and even coffeemakers from Amazon.
That would cut out the middleman. And there are plenty of them.
Prepare to Be Amazon’d
Alex Moazed is the founder of Applico—the world’s first platform innovation company—and the co-author of Modern Monopolies: What It Takes to Dominate the 21st Century Economy.
He says nine B2B niches are under immediate threat from Amazon. They are:
|
Company Name |
Ticker |
Industry |
|
Air Products & Chemicals |
APD |
Chemicals |
|
Anixter |
AXE |
Electronic Supplies |
|
Applied Industrial Technologies |
AIT |
Energy Supplies |
|
Cardinal Health |
CAH |
Medical Supplies |
|
W.W. Grainger |
GWW |
Industrial Supplies |
|
MSC Industrial Direct |
MSM |
Metals |
|
Sysco |
SYY |
Food |
|
Watsco |
WSO |
Building Materials |
|
Wesco |
WCC |
Electrical Supplies |
The first niche Amazon is targeting is industrial supplies. And it’s already putting the hurt on the industry leader.
W.W. Grainger is the biggest industrial supply wholesaler in America.
On April 18, the company released a terrible earnings report. It missed its profit target and had to guide expectations down for the year.
Grainger acknowledged that it failed to understand how price-sensitive customers have become.
To address this, the company is accelerating its planned price reductions this year.
Investors don’t like talk of lower prices. Grainger’s stock fell 12% on the news. And it continues to drift lower.
Moazed and his team at Applico predicted this.
In March, they told their clients that Amazon was about to disrupt Grainger. Since then, Grainger it’s down 24%.
The Tide Is Turning
Moazed predicts many large B2B businesses (like Grainger) won’t start to fight back until it’s too late.
At first, they won’t perceive Amazon as a threat.
That’s the mistake made by retailers who confidently said “people will want to see a TV before they buy it” or “people will want to try on clothes before they purchase them.”
They’ll be wrong.
Grainger isn’t the only company to avoid. All the companies in the list above are at risk of getting Amazon’d. Stay away.
Meanwhile, consider adding Amazon to your portfolio.
If the company can take just 10% of the B2B distribution market (it already controls about 10% of the entire retail market), its market capitalization would grow to $1 trillion.
That would take its stock from about $950 today to $2,100 in 2020—a 120% gain.
Regards,
Nick Rokke, CFA
Analyst, The Palm Beach Daily
P.S. If you want to know more about the disruptive nature of platform companies like Amazon, I recommend you purchase Modern Monopolies. It’s by far the best business book I’ve read in the past year.
MARKET BRIEFS
Grim Outlook for Retailers: Store closings, layoffs, and bankruptcies are upending the retail sector. This year, analysts expect Amazon to surpass Macy’s as the largest seller of apparel in America. Now, Amazon is looking to expand its own clothing brand. The company is considering selling custom-fit clothing. And it may acquire clothing manufacturers to expand in this category. It’s just the latest example of another industry getting Amazon’d.
Pentagon Deploying Blockchain Technology: Here’s the latest sign the blockchain is about to take off: The defense industry is getting on board… Lockheed Martin is the first U.S. defense contractor to partner with a blockchain company. It’s working with Guardtime Federal to improve cybersecurity. Last September, the Defense Advanced Research Projects Agency (DARPA) awarded a $1.8 million joint contract to Guardtime. If the military adopts blockchain technology, it will be full steam ahead…
This “Cancer” Is Spreading Across Canada: Canada’s banking system will soon be put to the test. And that’s because the country’s massive housing bubble is starting to unravel. And like every bubble before it, this one is going to end in catastrophe. Even Canada’s government can see this. That’s why it’s scrambling to prevent a full-scale housing crisis. If you have any money in Canada’s stock market, here’s what our colleagues over at Casey Research say you should do…
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MAILBAG
More praise for Palm Beach Confidential editor and resident cryptocurrency expert Teeka Tiwari…
From Linda H.: Teeka, thank you so much for the hard work, research, and training you have provided us on cryptocurrencies. My husband and I have been following your recommendations since September 2016… and we’re doing very well.
The biggest challenge for me is tracking our transactions and gains since this area is new and very fluid. Right now, I find using an Excel spreadsheet works for me. I track where we are at the end of each month.
So far, in dollar value, our $19,000 position has turned into $34,000. Yay!
Nick’s Reply: Hi Linda, we’re glad to hear about your gains. Our PBC team informs us that you can track your crypto portfolios through an app called Blockfolio. It’s super easy to use and a quick way to know your portfolio value at a moment’s notice.