Amazon.com Inc. has come off of a pandemic year that drove soaring profit and sales, but GlobalData Managing Director Neil Saunders says consumer willingness to spend money with Amazon doesn’t translate to zeal for the shopping experience.
“[A]s great as it is at functional factors such as convenience, operational prowess, technological innovation and so forth, it lacks something of a soul when it comes to creating inspiration and excitement,” Saunders said in a note following the e-commerce giant’s blockbuster first-quarter earnings report.
“This especially applies to physical spaces but is also evident in the very functional nature of its website and its difficulty in gaining traction in some sectors like luxury fashion.”
Saunders calls “”physical retail” and, more specifically, Whole Foods, Amazon’s “weak spot.”
First-quarter sales at physical stores fell 16% year-over-year to $3.92 billion.
Certainly, with Amazon /zigman2/quotes/210331248/composite AMZN -0.07% posting numbers like $26.9 billion in net income for the 12 months ending March 31 and first-quarter online sales growth of 44% to $52.90 billion, the company has other strengths.
“However, that weakness is one of the big opportunities for other retailers and, as a retailer like Target shows, focusing on things that Amazon isn’t so good at is a recipe for considerable success,” Saunders said.
GlobalData highlights the omnichannel advancements other retailers like Target Corp. /zigman2/quotes/207799045/composite TGT -0.30% , Walmart Inc. /zigman2/quotes/207374728/composite WMT -1.85% and Costco Wholesale Corp. /zigman2/quotes/201191698/composite COST -1.01% have made, starting before COVID-19, which turned vast fleets of brick-and-mortar locations into tremendous assets, with customers taking advantage of services like in-store pickup and speedy delivery from stores.
Still, analysts agree that Amazon is the frontrunner in the e-commerce race. The latest eMarketer data shows Amazon “dominates” U.S. e-commerce, forecasting sales growth of 15.3% this year to $367.19 billion.
Walmart comes in at number two, with U.S. e-commerce sales expected to climb 21.2% to $64.62 billion.
Amazon is also reaping the online shopping benefits of its Prime program.
“Core growth drivers were consistent with recent quarters, as e-commerce momentum was fueled by newer categories like grocery and by 200 million Prime members ordering more frequently and engaging with benefits more fully, including 70% year-over-year growth in Prime Video hours streamed,” wrote Canaccord Genuity Capital Markets analysts in a note.
Canaccord rates Amazon stock a buy and raised its stock price target to $4,400 from $4,100.
During the call, Brian Olsavsky, Amazon’s chief financial officer, said the annual Prime Day extravaganza would be coming soon.
“We are excited to announce that we will hold a two-day savings event during the second quarter,” he said, according to a FactSet transcript. While media reports say the event will take place in June, Olsavsky said more about Prime Day 2021, including dates, would be revealed “a bit later this quarter.”