Morningstar

How Disruptive Will Amazon Go Become?

The wide-moat online retailer's well-earned reputation for convenience--a component of our brand-intangible asset moat source--could be enhanced by checkout-free shopping.

Securities In This Article
Amazon.com Inc
(AMZN)

On Dec. 5,

The idea of Amazon physical stores seems to run counter to its successful online operations, which offer tremendous scale advantages. That said, we see a few reasons that this endeavor could succeed. First, by eliminating checkout and automating inventory replenishment--both of which could drive higher inventory turns versus traditional grocers--Amazon could effectively offset its lease costs. Second, we believe Amazon views physical stores as an extension of its logistics capabilities. While an 1,800-square-foot format would be too small to handle a high volume of order pickup/returns, we could see larger formats offering these capabilities. Third, by tying the service to a mobile app, it bolsters the network effect behind our wide moat rating while unlocking order frequency and targeted marketing opportunities. Finally, and perhaps most importantly, Amazon's well-earned reputation for convenience--a component of our brand intangible asset moat source--could be enhanced by checkout-free shopping.

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About the Author

R.J. Hottovy

Sector Strategist
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R.J. Hottovy, CFA, is a consumer strategist for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. He is responsible for consumer discretionary and staples research. He has covered the consumer sector as an analyst and director of global consumer equity research for Morningstar since joining the company in 2008, and specializes in a broad range of consumer categories including restaurants, footwear and apparel retailers, consumer electronics retailers, fitness clubs, home improvement and furnishing retailers, and consumer product manufacturers.

Before joining Morningstar, Hottovy was a director and senior stock analyst for Next Generation Equity and an analyst for William Blair & Co., specializing in a wide range of retail and consumer product companies. He also spent two years at Deutsche Bank, covering waste management, water utilities, and equipment rental stocks.

Hottovy holds a bachelor’s degree in finance and a second degree in computer applications from the University of Notre Dame, where he graduated magna cum laude. He also holds the Chartered Financial Analyst® designation and is a member of the CFA Institute and the CFA Society of Chicago.

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