Meet BRIAN, Morgan Stanley’s solution of industry characteristics that are harmless from Amazon’s ever-expanding reach.
“We introduce a five-factor structure to assist investors to think about industries’ susceptibility to Amazon disruption,” said Brian Nowak, an equity critic, in a mark on Wednesday.
“We recognize that other hurdles may emerge and that Amazon extends scaling its business and funding harder (in part to overcome some of these factors).”
“That said, at a high level, we see companies’ strengths/weaknesses in the following areas substantially impacting the pace and potential of Amazon separation.”
Here they are:
• Bespoke merchandises that are different and need lots of customization. Examples of enterprises include luxury goods and associates. Morgan Stanley also records grocery, which is interested given Amazon’s recent purchase of Whole Foods.
• Regulatory hurdles, or entrepreneurs that make commodities which are thoroughly examined by government authorities before they can be marketed. Strict ordinance around a merchandise makes it harder for Amazon to enter a business, Nowak said. Examples include pharma/healthcare and industrial airlines.
• Industry/market models with weaker total margins, lower order rates, and so on. “This is not to say Amazon can’t invest in capabilities (and, as seen with the suggested WFM transaction, acquire) to try to manage through these difficulties…but as a baseline, we believe industries of this nature are likely to be more challenging,” Nowak said. Examples involve dollar stores and DIY auto parts.
• Attention post-sale would need in-person customer service for training and installation. So far, productions such as home improvement are a “competitive moat” against Amazon.
• Nuances. Amazon is less likely to push into a business in which acquisition transactions are complicated. “The scripting and payment/reimbursement tools in the pharma industry are foreign to Amazon,” Nowak said.