Morgan Stanley has highlighted the industries that could be safe from Amazon's disruptive domination. Among the most secure are health care, financials, airlines, and industrials.
Morgan Stanley analyst Brian Nowak established five criteria to help determine whether each industry could endure the internet retail ambush:
- Uniqueness of product
- Legal or regulatory complexity around selling the product at the local, state, or federal level
- Business model (e-commerce is more challenging to scale in products with lower order frequencies, heavier weight, etc.)
- Quality of customer services post sale
- Level of complexity or nuance in purchasing (large industrial contracts can take months)
Citing regulatory hurdles and legal obstacles alone, Nowak noted that Amazon would struggle to break into industries like pharmaceuticals, automobile manufacturing, and commercial airlines. Due to relatively intense regulation from the government on these industries, companies already entrenched may be able to relax.
Nowak also noted that the uniqueness of product plays an important factor in a company's ability to resist Amazon. In his assessment, he asked several questions to gauge distinctiveness.
"Are the products commodities or is there a high level of product uniqueness (multiple brands, variations, etc)? Is there a bespoke design element involved? We argue that commodity products are more susceptible to Amazon disruption...while unique and bespoke items are less likely to be purchased through Amazon's marketplace," states the report.
The report added that industries with a high degree of customization include formal apparel, intimates, and luxury goods.
In the past few months, Amazon has made headlines with its acquisition of Whole Foods in June and its partnership with Sears in July to sell Kenmore appliances online, driving fears that e-commerce giant will continue to undermine additional sectors.
Groceries companies Kroger and Costco took a huge hit after the Whole Foods purchase, down 15 and 10 percent respectively over the last three months. Retailers Macy's and Gap are down 21 and 11 percent respectively over the same period.
--With reporting by Michael Bloom
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