Thank You Amazon, Retailers May Now Merge at Will

When reports surfaced regarding Office Depot merging with OfficeMax, the first thing which may have occurred to many, is regulators wouldn’t let this approximately $2 billion happen because the resulting store would be too large and create antitrust concerns. Much of these worries in retail however have decreased as of late because of the strength of Wal-Mart, Costco and of course Amazon. Let’s also remember that Staples is a major player in the space. It’s worth pointing out that Amazon in particular can be used by just about all retailers to justify industry consolidation.

If Internet radio was deemed enough of a threat to allow the only two satellite radio players Sirius and XM to merge, exactly what is the limit in retail when the threat is ecommerce? As pressure increases, can we can expect wave after wave of small retailers being forced to seek others to combine with.


Of course it is a bit soon to declare retail dead. Let’s take a look at the state of brick and mortar and e-tail.

Although Wal-Mart seems to be in the midst of a disastrous quarter, this may be due primarily to the elimination of the payroll tax holiday. Still, these tax breaks don’t seem to be coming back and Amazon’s strong sales seem to show they are more resistant to woes at the low-end of the consumer market. At least they were in Q4, we’ll see what happens in the next quarter. It seems the high-end of the mall market is doing fairly well according to Simon Property’s earnings – the low to mid-tier retailers however are expected to continue struggling.


It’s worth pointing out flash-sale sites like Ideeli may be in trouble as retailers have deployed a good deal of technology to combat the excess inventory which is the lifeblood of this market.

Best Buy for its part has decided to keep its price-match policies allowing it to compete with Amazon more effectively on the topline if not the bottom. I think there is more the company can do to increase profits but this is still a big step in the right direction.

No one expects Amazon’s e-commerce sales to get weaker and if anything they will continue to be a serious threat to just about every retailer in the world. And this will give the entire retail market cover to seek mergers with companies regulators wouldn’t even let them consider a decade ago.

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