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Amazon to Sell Wine Online - Analyst Blog
10/1/2012 4:45:00 PM
The world's largest Internet retailer Amazon.com, Inc. ( AMZN ) announced that it is planning to sell wines online.
The company started its wine business way back in 1999 with a 45% stake in Wineshopper.com, but closed down 10 years later as the business did not perform to expectations. It is now re-starting in a much smaller way, selling wines directly to consumers in Napa Valley, California.
Amazon is clearly driven by this very big market. It is true that growth prospects may not be so exciting (a ResearchAndMarket study estimates a 3% CAGR to 2013). However, given the size of the market ($33.5 billion by 2013), Amazon would see big gains if it is able to convert even a fraction of these sales to its online model. .
Amazon has room for expansion in this unique segment. Wine lovers are present at every nook and corner of the world. So its current selection of Chardonnay, Pinot Grigio, Pinot Noir, Champagne and other exquisite wines could see more takers.
Amazon is one of the leading players in the extremely fast-growing retail ecommerce market that includes players like eBay Inc ( EBAY ), Netflix Inc ( NFLX ), Apple Inc ( AAPL ) and others. While the strong growth prospects are making the market more competitive by the day, Amazon continues to maintain and even grow its share on the back of its consistent and reliable service. Amazon's scale of offerings, its broad reach and platform approach are the keys to its success.
Amazon's second quarter results were more or less within expectations. Reported revenue of $12.83 billion was down 2.7% sequentially and up 29.5% from the year-ago quarter. This was better than the guidance for the quarter of $11.9-13.3 billion (down 4.4% sequentially, or up 27.1% year over year at the mid-point) and in line with consensus expectations. Year-over-year revenue growth was 32%, excluding an unfavorable currency impact.
Currently, Amazon has a Zacks #3 Rank, which implies a Hold rating in the near term.
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