Which Stocks Will Boom When Amazon Launches in Australia?
I have to admit that I’m a huge fan of Amazon [NASDAQ:AMZN]. In fact, I use Amazon so much that friends now call it ‘Samazon’.
In the last month some of the things I’ve ordered include:
- A new light fixture for our kitchen
- Eight LED light globes for the new light
- Ninja Turtles dress up kit for my nephew
- A Bluetooth wireless mouse
- 25m outdoor extension cord
- 3000W garden blower/mulcher/vacuum
- Audio Technica headphones
But that’s just a fraction of the use Amazon gets from my household. There’s also Amazon Prime, which we’re subscribers to. That includes free same and next day delivery on most items. It includes Amazon Prime TV, which is like Amazon’s version of Netflix. It also includes Amazon’s Prime Music, which is like Amazon’s version of Spotify.
Then there’s the Amazon Fire Stick on the TV in the kitchen. And there’s Amazon’s Echo smart home hub. I also have an Amazon Echo Dot on order, to connect a few more things around the house.
Oh, and while I was away my wife purchased a bunch of new cushions for the couches. All through Amazon.
We like using Amazon because I typically work from home. That means I’m in most of the time when deliveries come. And it means I don’t have to waste time going to shops. I don’t have to battle traffic. I don’t have to deal with giant ‘big box’ retailers where it’s impossible to find someone to help and impossible to find a product.
There’s a lot to like about Amazon. The prices are always lower than ‘bricks & mortar’ retailers. If by chance we happen to be in a physical shop, we’ll always compare the prices with Amazon.
But it’s the convenience and ease as well. Let’s say I’m building a computer. I can research everything I need online. I can then build a list on Amazon of everything I need.
I don’t have to go to a shop and hope they have the parts in stock. I don’t have to wait for them to get it in. It’s just click, buy, and wait for delivery.
It’s speed, convenience, ease, and value.
Who makes all those boxes?
For all the upside to Amazon, there are a few things that aren’t all that great. That’s right, the world’s biggest advocate for Amazon has a few gripes…
The first problem is a cardboard problem. You see, when Amazon ships an item it comes in a cardboard box. Now you wouldn’t think that’s much of a problem. Almost all deliveries come in some kind of a cardboard box.
But the problem is the disproportionate size of the box relative to the item. Quite often we’ll receive a huge cardboard box. And it’ll have loads of filling paper. But the item itself will occupy maybe 1/5th of the actual size of the box.
All of these cardboard boxes end up in the recycling bin. And when bin collection comes around the bin is absolutely chock-full of Amazon cardboard boxes.
The question we keep asking ourselves is, who supplies Amazon’s cardboard boxes? They must get them from somewhere. And whoever supplies them must be making a killing.
We can’t see why it’d be any different in Australia. Amazon is set to take over the retail and logistics world in Oz. Whoever recycles and supplies cardboard boxes must be ready to mint a small fortune.
That means our attention turns to the likes of Visy and Cleanaway Waste Industries [ASX:CWY]. Visy and Cleanaway are two of Australia’s biggest recycling companies. It’s quite likely their recycled cardboard will be provided to Amazon to make boxes for shipping.
Also perhaps a company like Orora Group [ASX:ORA] might get the tap on the shoulder from Amazon for cardboard supplies. And maybe even Pro-Pac Group [ASX:PPG] and their Quick Brown Box company could see their boxes heading to the world’s biggest retailer.
The point is that Amazon’s going to need a lot of cardboard boxes. Those boxes are going to need to be recycled. And then used again. And so on and so on.
The other problem that we’ve started to notice with Amazon is the blurring between Amazon products and Amazon Market products.
Now to Amazon newbies, this is a major difference. Amazon will often sell products directly sold by and shipped by Amazon. That means products that are in the warehouse, and ready to go instantly. They will enter the supply chain as soon as you click ‘buy’.
Is this Amazon or Jiang Men Shi Dong Shi Shi Ye You Xian Gong Si Ltd?
However, mixed in with it all now are products sold by one supplier and ‘fulfilled by’ Amazon.
For example if I want some Phillips LED globes I can buy them from Amazon. These are ‘Dispatched from and sold by Amazon’. In other words Amazon already has these products. They’ve procured them from Phillips already.
But some CYMK Dimmable LED Bulbs are ‘Sold by AlanTan and Fulfilled by Amazon’.
‘AlanTan’ is actually Jiang Men Shi Dong Shi Shi Ye You Xian Gong Si Ltd, operating out of Pengjiang, China. It’s a shop front that sells on Amazon but is not really coming directly from Amazon.
We’ve found that the quality of goods not dispatched and sold directly from Amazon tend to be a little…less reliable. That means they more frequently arrive broken or missing parts, and need to be returned.
This hasn’t turned us away from Amazon, clearly. But it’s a sign that as good as Amazon is, it still has major problems. The kind of problems that a company that big is always going to have to deal with.
But even with their fair share of problems, Amazon is going to rip Aussie retail apart. They’re going to change the face of Australian logistics. They are going to make companies like Harvey Norman, JB Hi-Fi, Kogan and Myer bleed revenues.
It’s going to be the biggest shake up in the Aussie market since…well, since forever. And we can’t wait to see it all unfold.
Editor, Australian Small-Cap Investigator