--William Blair analyst finds Amazon has average 11% price
discount to competitors
--Hhgregg, Best Buy, Target, Bed Bath & Beyond found most at
risk from Amazon
--Wal-Mart seen at medium risk to Amazon
By Andria Cheng, MarketWatch
NEW YORK (MarketWatch) -- From Target Corp. (TGT) and Kohl's
Corp. (KSS) to Best Buy Co. (BBY) and Bed Bath & Beyond Inc.
(BBBY), retailers are facing increased risk of losing share to
online retailer Amazon.com Inc. (AMZN), a study showed Monday.
In a report, William Blair & Co. analyst Mark Miller picked
a total of 2,400 items -- 100 items for each of the 24 retailers
studied, 22 of which had physical stores -- and compared
merchandise overlap and relative pricing against Amazon.
On average, Amazon was found to have an 11% price discount
advantage on each item. The discount increased with the number of
items purchased because of the savings earned on shipping, the
survey showed, adding that Amazon has a bigger pricing advantage on
items over $20.
Nearly half of physical store items are available on Amazon with
third-party sellers representing more than 60% of the online
retailer's offerings.
Despite increased attempts by states to collect online sales
taxes, the study showed Amazon will still come out ahead. For
instance, while Amazon is priced lower on 56% of items including
tax savings, it's still priced lower on 48% of items when tax
savings benefits are excluded, the report said.
Overall, the study showed retailers with above-average risk of
share loss against Amazon include electronics retailers Hhgregg
Inc. (HGG) and Best Buy Co. (BBY), home-furnishings chain Bed, Bath
& Beyond Inc.(BBBY), discounter Target Corp. (TGT), sporting
goods retailer Dick's Sporting Goods (DKS), mid-priced department
store operator Kohl's Corp. (KSS) and pet medicine seller PetMed
Express Inc (PETS).
The world's largest retailer Wal-Mart Stores Inc. (WMT) is
placed at medium risk because it doesn't overlap with Amazon in the
perishables department, and the online retailer tends to be less
competitive on lower-ticket items, the study found.
But the also study found Wal-Mart isn't considered at low risk
against Amazon because of the relative inconvenience of shopping at
a huge supercenter store versus online.
Miller cut his ratings on Hhgregg and pet-medicine seller PetMed
Express, sending shares of Hhgregg lower by 4.6%. PetMed dropped
3.9%. Best Buy was down 1.5%. Target and Bed Bath & Beyond each
declined 1.1%.
In a closer look at Hhgregg, for instance, 74% of the retailer's
100 items selected were found for sale on Amazon.com, which has the
second-highest assortment overlap among Miller's coverage list. On
those identical items, average per-item savings at Amazon.com were
more than $80, the highest within his coverage, which represents
more than a 12% per-item savings relative to the comparable
in-store price, he said.
"The price-comparison risk for Hhgregg is a particularly high
concern because of the high average ticket, and 84% of the
overlapping items are available at lower prices," the analyst
said.
He said while the company's aggressive approach in matching
Amazon's prices upon consumer request could slow the dollar-share
loss, it could also hurt its profit margins over time as
price-check apps and mobile e-commerce become more prevalent, the
analyst noted.
Hhgregg's larger rival, Best Buy, has 69% of product overlapping
with Amazon, which has a roughly 12% price discount advantage on
identical items. Kohl's and Bed Bath & Beyond each have 60% and
55% of product overlap, with Amazon having per-item price discount
advantage of about 20% each.
Target has a 45% product overlapping with an 11% price gap
against Amazon. Wal-Mart has a 28% assortment overlapping with
Amazon priced 5.4% lower on those identical items, the report
said.
Among retailers facing below-average risk of share loss against
Amazon include Blue Nile (NILE), Whole Foods (WFM), Family Dollar
Stores Inc. (FDO), Dollar General Corp. (DG), CVS Caremark Corp.
(CVS), Walgreens (WAG) and TJX Cos. (TJX), the report said.
The study also found that retailers themselves have "divergent"
online commerce strategies and are often "playing defense" with
pricing on their websites often not price competitive with their
own stores because of high shipping costs.
For instance, about 72% of items from those retailers with
physical stores are available on the companies' websites with their
online per-item pricing about 14% higher than their store pricing
after factoring in shipping and other costs, the data showed.
-Andria Cheng; 415-439-6400; AskNewswires@dowjones.com