With all the fanfare about Amazon s (NASDAQ: AMZN ) launch of its Kindle Fire,
much of the focus has been on the impact it will have on Apple s (NASDAQ: AAPL )
iPad. Sure, it probably take away some market share because of the $199 price
point. But baring a disaster, Apple likely will continue to dominate the premium
market. At least as of now, there is no way the Amazon brand can compete on this
level. Instead, investors should look at the Kindles impact on Amazons
brick-and-mortar rivals. Amazon already has done a masterful job in grabbing
more and more business from its more traditional competitors some of which had
no choice but to liquidate, such as Borders and Circuit City. And Amazon has
some unique competitive advantages. For example, it has a highly sophisticated
e-commerce infrastructure tied to a customer analytics system. In other words,
Amazon has no need to deal with the huge costs and risks of supporting retail
locations, and the company always seems to know what users want to buy. Amazon
also has a top-notch team of software engineers. As a result, the company has
been able to produce standout digital products. So while Barnes & Noble (NYSE:
BKS ) has the Nook, it seems like a stretch that it can effectively compete
against Amazons Kindle line, which also includes the Kindle Touch and original
Kindle. Barnes & Noble does not have the resources to lock in content, nor the
technical capabilities to stay on the cutting edge. Then there is Best Buy
(NYSE: BBY ). True, the company still gushes cash flows, but its big-box model
looks antiquated. The company should be aggressively closing stores, and it
doesnt have a compelling digital strategy. Several analysts do think Best Buy
will get a boost from sales of the Kindle Fire this Christmas season.
Ironically, this will just further Amazon's advantages by putting more
e-purchasing power in the customers hands. For investors, the real story here is
that caution should be taken with brick-and-mortar retailers. Granted, they
might not necessarily disappear, but its difficult to think the Best Buys of the
world can find growth as long as Amazon relentlessly continues to transform the
retail landscape. Tom Taulli is the author of "All About Short Selling" and
"All About Commodities." You can also find him at Twitter account @ttaulli.
He does not own a position in any of the stocks named here.
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