Amazon Shareholders, This Shopping Season Should Have You Worried

 | Nov 28, 2016 | 8:00 AM EST
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Here's something that won't come as a surprise: online shopping is off to a strong start this holiday season.

Online sales for Thanksgiving Day and Black Friday reached $5.27 billion, up a strong 17.7% from last year, according to data Saturday from Adobe. Black Friday set a new record by ringing up $3.34 billion in sales, an increase of 21.3% year over year.

A good portion of the online shopping is being done on mobile devices. Black Friday became the first day in retail history to notch over $1 billion in mobile sales at $1.2 billion, up 33% from a year ago. This mobile buying explosion is likely happening for several reasons.

First, retailers have greatly improved their mobile shopping experiences through expanded assortments, better photo use and an easier checkout process. Second, larger smartphone screens make it easier to shop from a device than in years prior. Back in the day, say three years ago, people would have been unlikely to even have a retailer's app on their phone, because they knew it offered a horrible shopping experience (or no experience at all -- ordering stuff from mobile via an app is still relatively new for many retailers).

And finally, connection speeds from the phone companies -- and in-store Wi-Fi -- have improved greatly. Couple that with an increase in consumers' trust that a transaction via smartphone will be completed (and accounts not hacked), and it's easy to understand the boom in mobile buying so far this holiday season.

Obviously, Growth Seeker portfolio name Amazon (AMZN) is getting its fair share of the digital shopping pie, especially given the short-term outages to sites such as Macy's (M) , Victoria's Secret and others. All that has done is strengthened confidence in buying stuff off Amazon and probably shifted some sales to the retailer. According to Amazon, mobile orders from Amazon customers on Thanksgiving Day exceeded both Thanksgiving and Cyber Monday in 2015. More items were ordered from Amazon on this Black Friday than a year ago.

So all in all, it looks like a pretty solid start to the holiday shopping season for Amazon. It's probable that the stock gets a second look based on the digital data floating around thus far. I don't think Amazon shares retest the October highs before year end -- the third quarter's margin disappointment still has many on Wall Street weary -- but it should be tradable on the long side this week and into December.

Having said all of that, this holiday season has brought several very interesting developments to light that should have Amazon investors mildly concerned. They include:

Retailers such as Macy's and Target (TGT) are working closer than ever before with their top vendors to get the lowest prices possible for consumers, while still earning a respectable margin. The discounts out there on large-screen TVs, apparel and gaming bundles for Thanksgiving and Black Friday were nothing short of stellar, truly reminiscent of hopping on Amazon's website when searching for an item. Bricks and mortar retailers may have finally opened up a discussion with their customers this holiday season on Amazon not being the lowest-priced player on everything.

This is shaping up to be the first true omnichannel holiday season, where retailers such as J.C. Penney (JCP) , Target, Walmart (WMT) , Macy's and others are successfully shipping product from their stores to service digital orders. In other words, the dream of connecting the digital world with the physical world is finally happening. Bricks-and-mortar retailers are finally showing they can service shoppers wherever they may be and whenever they want to shop. Powerful stuff. That should concern Amazon, because it doesn't have any stores and has risen to fame on the back of being able to service the on-demand world with supreme ease.

When the CEO of Target, Brian Cornell, told me on the phone on Thanksgiving night that online orders were still tracking up double-digits, my first thought was: Walmart and countless others are probably seeing similar rates of growth in the kickoff to holiday shopping. There is a reason for that -- retailers have done a good job significantly expanding the number of items available on their websites. Walmart, for example, now has over 20 million items on its site vs. 8 million last year, as it has expanded the number of third-party sellers.

The use of third-party sellers has long been a tactic by Amazon to drive business -- by partnering with businesses around the globe, Amazon has said to shoppers it has any possible item a person may want. Amazon still leads in this category, but bricks-and-mortar retailers are fighting back hard and are starting to get results from their digital assortment efforts.

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