Amazon.com, Inc. (NASDAQ:AMZN) is the dominant online retailer, but retail doesn’t end at the keyboard. The firm has done an incredible job in stealing sales of certain kinds of goods from brick and mortar stores, but there is still one area that the firm has failed to operate in well. Fresh food is a new horizon for Amazon.com, Inc. (NASDAQ:AMZN).
A new report form Bernstein Research on the opportunity for Amazon.com, Inc. (NASDAQ:AMZN) in fresh food brings up an interesting metric. Every year the average customer spends $500-$600 a year on Amazon.com, Inc. (NASDAQ:AMZN). Wal-Mart gets $1,650 per year from each customer. In order to progress to the next level Amazon.com, Inc. (NASDAQ:AMZN) needs fresh food. Bernstein reckons the prize is worth $220 billion every year.
Amazon.com fresh and beyond
The end game for Amazon.com, Inc. (NASDAQ:AMZN) isn’t just fresh food, its the whole of the consumable business. Consumer packaged goods, or CPGs, are underrepresented in the Amazon.com Inc. (NASDAQ:AMZN) revenue mix. That might be because customers go to Wal-Mart where they can get everything.
You can’t get everything on Amazon.com, Inc. (NASDAQ:AMZN), but if you could you probably would. Bernstein takes a look at the total market for online retail and estimates its worth at $1 trillion in the United States. the Bernstein view, which the analysts call conservative, is that revenue from that market could be worth $222 billion a year for Amazon.com Inc. (NASDAQ:AMZN).
Last year Amazon.com, Inc. (NASDAQ:AMZN) pulled in just $74.4 billion in revenue last year. A $220 billion revenue opportunity is almost unheard of, even if it is likely to come in at low margins. Amazon.com Inc. (NASDAQ:AMZN) will try its best to expand in this direction, and itr’s already made attempts to do so.
The fresh food and consumer packaged goods industry is clearly where Amazon.com Inc. (NASDAQ:AMZN) should be headed if it’s looking for the biggest possible expansion in its business. It’s not an easy switch, however. Shipping books and shipping cucumbers are two very different businesses. Amazon may be up to the challenge, but there will be obstacles.
Perishable goods are a new horizon for Amazon.com Inc. (NASDAQ:AMZN), and it will take a huge amount of investment before the first apple can be delivered. the company needs to develop what Bernstein calls last-mile infrastructure. That’s going to take some investment, though that’s not something the company has shied from in the past.
Amazon.com, Inc. (NASDAQ:AMZN) has piloted Amazon Fresh in Los Angeles and Seattle in the past. Those projects gave the company some idea of the engineering that would be necessary to move the company to the next level, but it the market is still wondering if it can pay off. Amazon.com, Inc. (NASDAQ:AAPL) is already trading at a silly multiple. More years of growth and few earnings are a scary prospect for investors.
Lucky for Amazon.com, Inc. (NASDAQ:AMZN), the company’s current supply chain makes it able to supply all non-food CPGs. The same supply chain gives it a large head start in perishables, but a substantial amount of investment will be needed in order to bump the service up to that $220 billion level.
Amazon.com, Inc. (NASDAQ:AMZN) will need to push itself to an entirely new level of business if it wants Amazon Fresh to work the way Bernstein thinks it can. The analysts put an Outperform rating on Amazon stock in the face of the opportunity. With stock already trading at close to an all time high, outperform is a scary word, and it can only harken back to ’99.