Few companies have ever managed to alter the world as much as Amazon.com (AMZN). Countless retailers have fallen since Amazon took over the e-commerce market, and brick-and-mortar retailers that have managed to remain relevant have only done so by investing heavily in their online businesses.
The Amazon Effect refers to the disruption Amazon has created in the retail space, thanks to the millions of products you can buy online, usually finding a cheaper price than in a store, and increasingly fast delivery times.
“Showrooming”, which refers to shoppers looking for products in stores like Best Buy, only to buy them cheaper on Amazon, has forced retailers of all sectors to adjust their pricing, invest heavily in their own online businesses, and alter the way they treat and approach customers to get them to make in-store purchases.
Amazon continues to grow in importance, and not all retailers are going to manage to compete and survive.
As such I love Amazon stock. While I believe AMZN is a must-own stock, you have to keep your portfolio diversified, so it is smart to make sure you have some stocks in your portfolio that are immune to the Amazon effect or have business models that can take advantage of Amazon’s growing importance.