Trader Talk with Bob Pisani
Apparel stocks dive as the Amazon juggernaut rolls on.
First, it was Amazon buying Whole Foods and threatening to disrupt the grocery business.
Never mind Whole Foods has less than 3 percent of that business, the mere fact that Amazon was involved has been enough to send grocery chains into a tailspin.
Tuesday brought Amazon Prime Wardrobe, where the online retailer tackles the biggest problems of buying clothes: 1) the time it takes to shop, 2) the hassle of finding the size that’s right for you, and 3) returning stuff you don’t want.
Judging by the market’s reaction, it looks like the Street believes Amazon has advanced the ball considerably: Nordstrom closed down nearly 4 percent, JC Penney more than 5 percent, and Ascena Group and Chico’s more than 4 percent. Even discounters like TJX and Ross Stores fell 3 percent and nearly 5 percent, respectively.
It’s a simple idea: try before you buy, and only pay for what you keep. Pick out three items or more, and you get shipping for free (if you’re a Prime member of course). You have seven days to try the stuff on and decide what you keep.
The real genius is the return policy: you get 10 percent off if you keep three or four items, 20 percent off if you keep five or more. The more you keep, the more you save. Dump the rest in the box and leave it at your doorstep: “You don’t even need to be home when they come by to pick it up for free.”
Amazon announced Wardrobe this morning with a pithy (1:49) video filled with diverse, impossibly good-looking people trying on all manners of clothes, showing them off to friends and family, then dumping what they didn’t want into a giant box and leaving it at their doorstep, where, presumably, UPS will magically whisk everything away. (You can see it here.)
Analyst reaction has been muted so far, but give it a day or so. Pacific Crest also noted the key was the return policy: “We think incentivizing consumers to take multiple units (similar to Walmart’s Jet.com) is critical to help lower shipping/handling costs long term and drive more sustainable e-commerce business models.”
In theory, this is not a retail apocalypse, since it appears Amazon will support brands that are outside Amazon’s private label, including Calvin Klein, Adidas, Hugo Boss, and others. The market may be trying to make this distinction. Calvin Klein is owned by PVH; that stock is only down 0.6 percent midday.
But PVH is the exception. Every large shoemaker—which theoretically could also sell through Amazon—is down two to three percent, including Deckers, Skechers, and Steve Madden.
How far does the fear of Amazon extend? Even auto parts sellers are down: O’Reilly Automotive and Advance Auto Parts are down two and four percent, respectively. Even Monro Muffler Brake is down two percent.
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A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.
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