What's that Giant Sucking Sound? Amazon and Retail Revenue

Miriam Gottfried reporting for the Wall Street Journal:

“Here is a thought that should make investors in U.S. retailers tremble: Amazon could inflict roughly the same amount of cumulative pain on its competitors over the next three years as it did over two decades as a public company. Revenue for Amazon’s North America segment—the bulk of its retail business—was $79.8 billion in 2016, marking the second consecutive year of 25% growth. Back in 1997, revenue was below $200 million for its U.S. business. If its now massive North America segment continues to grow at 25% a year, it will take only three more years for Amazon to add another $76 billion in annual revenue. That could deliver a swift blow to a U.S. retail industry, already wilting from Amazon’s aggressive expansion.”

At its current growth rate, Amazon could double in size in the next three years. Or, to be more blunt, Amazon could suck the same amount of value out of the U.S. retail market in three years as it has in the previous twenty. Let that sink in. Even though the size of eCommerce is relatively small - just under 10% of total retail, Amazon is building an almost unassailable moat around online retail. Amazon’s growth of course, is coming at the expense of brick and mortar retailers, yet some retailers like TJ Maxx and Marshalls have found niches and have been able to stave off Amazon’s encroachment. It will be fascinating to see how other brick and mortar retailers respond over the next several years.