But what cannot eventually be conquered by the leviathan AMZN?
Good question!
Most bricks and mortar retailers have an online presence and once you display merchandise on line it’s an easy step to sell it and to deliver it. The online is usually their fastest growing segment. But Ross Stores has no online sales at all. They cultivate the bargain hunting atmosphere in their stores, not nicely organized racks but stuff on tables to riffle through. While I was in the US I used to frequent their stores looking for button down Oxford shirts. Usually I would find two or three, maybe four that suited me but you can’t go to Ross stores in the hopes of finding a dozen identical or matched items. So you buy a couple and go back the next week to see what you find.
I’ve been an Amazon shopper for a very long time and I love Amazon for standard items, brand name items like books. With the scarcity in Venezuela I’ve been increasing my shopping at Amazon and have the stuff sent to me by currier. I use Fruit of the Loom socks and I had no difficulty in buying a pack of seven at Amazon. Then I looked for face towels. We have used Cannon for ever but that brand is gone. So I chanced on some unknown brands. The first set I got were thin and scratchy. The next set over large and much to thick and plush. That’s the difficulty with Amazon, you can’t feel the merchandise. Returns, for me, from Venezuela, are extremely difficult. So I stick to well known brand names and known products.
And you have to have a credit card to buy at Amazon. The niche Ross targets is very difficult for Amazon to penetrate. In addition, Ross has an army of very experienced buyers and often the stuff they buy goes into storage waiting for the right season. That’s too specialized for Amazon and possibly too small a niche to bother with.
I’m not saying Ross is entirely safe, nothing is. But Ross has some formidable moats and a history to prove it, that’s 25 years of 22% annual fairly steady growth:
http://invest.kleinnet.com/bmw1/stats25/ROST.html
The next chart is very informative, it’s a 14 year comparison of six retailers:
2 off price: ROST and TJX
1 specialized store: BKE
2 storied department store: M
1 once very popular brand: GPS
1 a giant from the recent past: WMT
http://softwaretimes.com/pics/rost-05-13-2016.gif
I didn’t include Amazon because it’s literally “off the chart”
http://softwaretimes.com/pics/amzn-05-13=2016.gif
The full lesson that can be learned from these charts is too long to include here but the highlights are that off-price is the niche to be in because there are many more poor people than rich. Walmart had its decades in the Sun but they have saturated their market and China is no longer as good a supplier as it used to be with rising wages. If Amazon is eating into retail it’s not at the expense of off-price, not yet anyway.
BTW, investors who prefer TJX over ROST because their stores are better organized are missing the point! TJX is more like a department store and look at what is happening to them.
Denny Schlesinger
