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Amazon dominates as retail rivals plunge

Amazon (AMZN) continues to shine as retail stocks plunge. Whether they are traditional mall retailers in the US or e-tailers based in China, many names in the retail industry are under selling pressure.

One of the strongest US large cap stocks, AMZN pulled out of the recent market correction and shot up to new highs above $650. Here's an updated weekly chart of this dominant online retailer, which recently came full circle with the opening of its first physical book store.

Amazon.com Amazon AMZN stock chart price


Meanwhile, traditional brick and mortar retailers like Macy's (M), Fossil (FOSL), and Wal-Mart (WMT) are sinking fast. Even Nordstrom (JWN), a high-end department store with a well-integrated online presence is fading fast in this market. The weakness may spread to other high end retail names like Tiffany and Co. (TIF) and Sotheby's (BID), a trend we highlighted last month in our "Retail and Leisure Stocks Slide" post.
 
 

 
The recent downturn in retail is also hitting online sellers in US and China. 

Take a look at the recent breakdown in VIPS, one of the leading stocks of the past 3 years. From late 2012 to its 2015 high of $30, VIPS registered a 3,000% gain. Today it's down over 25% and down 5% YTD. The uptrend has been broken. A series of lower lows (downtrend) is now in place, as VIPS trades below its weekly moving averages.

 

We're seeing a generational shift to increased online shopping and away from "stuff" sold at big box and mall stores. Millennial shoppers still frequent physical stores, but they (and, increasingly, older shoppers) also tend to use stores as a showroom for goods purchased online. The seamless retail experience that younger shoppers demand is currently not available at most major retailers. 

From Accenture's report on Millennials: 

"...Unfortunately, our research shows that retailers are currently under-delivering when it comes to the demands of Millennials. When Accenture evaluated more than 60 global retailers to understand how seamlessly they deliver the customer experience, we found that most of them had big holes in their approaches.

We have identified six dimensions as contributing to a seamless retail experience. Today, most retailers are making headway on only two: providing a consistent cross-channel experience and offering personalized interactions. The other four—connected shopping, integrated merchandising, flexible fulfillment options, and the capabilities and enriched services that help make the overall shopping experience better, faster and more memorable—remain works in progress."

It's a trend analysts are calling the "Amazon effect".

 
We touched on some of these trends last month in our Wal-Mart vs. Amazon post. The bottom line here is that AMZN remains the strong stock while WMT suffers its biggest drop since the 2000 bear market.

You can also go farther back to our fall 2013 post on Amazon, the "21st century Sears" (the stock has climbed 100% since then). Between its dominant position in online retail and the now well-recognized growth of its AWS business, some key investors have been happy to hold on and stick with a winner. 

 
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