The consumer's dead, unless the consumer's buying on Amazon (AMZN). That's what this market is saying and saying loud and clear.
I know after Amazon's amazing quarter that it is possible Amazon is cutting into everyone's business. Yes, Prime is that powerful a value proposition. I know I am addicted to it and even use it for things I used to buy at the drugstore. Why not? Why lug bulky tissue and paper towel bags from the store -- even if it across the street -- when they can deliver it to my house?
I shuddered when I heard them talk on the call about how little penetration they still have vs. what they plan on having in a short period of time.
But here's the thing. They idea of that Amazon can assassinate every single retailer is simply untrue. It is a vicious competitor. But people are still going to go to the store. They are still going to try things on. They are still going to stop on the way home from work.
This group's been under pressure for a variety of reasons. We know from the aggregate numbers we saw today that personal income's up 0.4% while spending is up just half of that. We know that the consumer's been trading down, even as we would expect at this point in the cycle that the consumer would be spending more money and that there would be more spending in general because hiring is so robust. After all, last week we had the lowest jobless claims in 40 years.
But millennials, the key future demographic, have demonstrated an abhorrence of spending aggressively on themselves. They like experiential spending not material spending. They will pay up for their cellphone and they will use Uber, but they just aren't traditional shoppers. Those cellphones are their own personal mall and we know from Facebook (FB) and from Amazon it's where they do their buying. That eliminates the impulse buying that comes when you go to the store itself.
Amazon's a legitimate disrupter. We know that for certain after this quarter. It can make so much money that it can easily spend more on same-day delivery or buttons placed on dishwashers and washing machines that automatically go into Amazon so you can easily buy Cascade or Tide.
In fact, Amazon upset the apple cart everywhere touting better sales of tits hardware -- there's a swipe at Apple (AAPL) -- and committing to more spending on entertainment, which is all about stopping Netflix (NFLX).
Plus, we are well aware of how disruptive the entire internet web food chain can be. The fantastic quarters from Expedia (EXPD), the online travel agent, and LinkedIn (LNKD), the online career bulletin board, show the endless competition that the web gives to so many different businesses. Expedia's numbers were boosted by the HomeAway acquisition as we predicted. LinkedIn's issues from the previous quarter, the one that sent the stock plummeting to $100 from $194 in a matter of days, seem to be solved.
I don't expect the success of those outfits to go away any more than I expect that Facebook or Alphabet (GOOGL) might disappear. Nevertheless, I see an overreaction occurring where all retailers are getting clipped and I think that's excessive. I am not going to go out on limb yet and tell you it is time to buy. The negativity seems a little longer lived than that.
Give it a few days, though, and we will remember that retail's not being demolished by Amazon and some of retail is truly thriving. Keep your powder dry to buy stock in some retailers when they get so oversold that they are just too tempting to buy.
That's not the case yet, today. Not after Amazon shocked us. But brick-and-mortar's not going away. It's just changing and those that adapt, and many are, will do just fine.