Consumers continue to spend more money with online retailers, and use
brick-and-mortar outlets as a place to test products and comparison shop. Last
week The Wall Stree t Journal reported on troubles facing consumer electronics
giant Best Buy (NYSE: BBY ) in its article "Forecast for Best Buy: Worst Is
Yet to Come." The Journal noted that online retailer Amazon.com Inc. (NASDAQ:
AMZN ) is finding great success from this continued consumer migration away from
traditional stores. Here's the money quote from the article: "Indeed,
Amazon's electronics … revenue rose 66% to $18 billion last year, helping it
lift market share in different segments. Its share of LCD TV sets, for instance,
nearly tripled, to 3.7% at the end of 2010 from 1.3% in 2007, estimates research
firm Traqline. Its share of portable audio devices rose to 11% from 4.6% in the
same period. A key to that success is that Amazon beats bricks-and-mortar
retailers across the board on average electronics prices, a Wells Fargo study
showed." The capture of more and more market share by Amazon, and the
concomitant loss by Best Buy, isn't an isolated case. Not only has Amazon
grabbed market share away from booksellers such as Barnes & Noble, Inc. (NYSE:
BKS ), but it also continues gobbling from other big retail giants. The consumer
shift may come is shifts and starts so investors may want to look at long-term
options on some of these retailers. Here are five options trades to take
advantage of the online retail migration. Amazon.com The most obvious way to
play this trend is to go long AMZN shares. The stock currently trades around
$170 per share, so Amazon bulls should check out the AMZN Apr 2011 175 Call .
Amazon also has long term trading options dated January 2012 and January 2013.
If you think it the it will take Amazon a little longer to dominate retail these
months may be attractive. The volume isnt large but there is some open interest
in these months. Best Buy The other obvious trade here is to short Best Buy
shares, and doing that is easy with the BBY Apr 2011 31 Put . Best Buy has the
same longer-term expiration months as Amazon January 2012, and January 2013.
Volume is light at this point but they may be worth exploring if you think Best
Buy will lose market share as 2011 goes on. Best Buy faces a quandary it will
probably generate foot traffic and sales with lower prices, but that reduces the
revenue it needs to hire and pay its smart sales staff, a major advantage it
holds over Amazon. The danger is dropping staff and presenting itself as
bookseller Borders did before it filed for bankruptcy long aisles and few
customer helpers. Last month Borders filed for bankruptcy and prepared to close
about one-third of its stores. Thats a no-go.
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