Amazon shares weighed down by rivals' free shipping
Credit: Reuters (http://www.reuters.com)
A box from Amazon.com is pictured on the porch of a house in Golden, Colorado in this July 23, 2008 file photo.
Credit: Reuters/Rick Wilking
Amazon.com Inc shares fell as much as 3.4 percent Monday on concerns that offers of free shipping by Wal-Mart Stores Inc and other retailers could challenge the online giant's results.
Amazon shares have fallen $12.37, or 7.1 percent, since hitting a 52-week high of $173.37 last Wednesday.
"It's going to be a fight for revenue that could impact profitability," said BGC Partners analyst Colin Gillis.
Last week, Wal-Mart said it would offer shoppers free shipping with no minimum purchase requirement at its website through December 20, signaling the retailer was ready to take on Amazon's e-commerce leadership.
"How can Wal-Mart management be happy for Amazon to have the label of 'the Wal-Mart of the Web'?" asked Gillis.
While both retailers strive for low prices, Amazon's free shipping has helped it increase customer loyalty. The perk has become increasingly popular among retailers vying for online sales.
Amazon offers free shipping for orders over $25. It also offers a discount shipping program called Amazon Prime that costs $79 per year for unlimited shipping.
U.S. bookstore chain Borders Group Inc said last week it was working with ShopRunner, a members-only online service, to offers free two-day shipping with no minimum order size and free shipping on returns. ShopRunner is a unit of GSI Commerce.
Some of the decline in Amazon shares since last Wednesday was the result of investors taking advantage of the stock's rise in recent months, analysts said.
"In the last few years, this is the highest we've seen Amazon shares, and it's probably just a little bit of profit-taking," said Hudson Square Research analyst Scott Tilghman.
Amazon's prices on some items, including toys, remain lower than Wal-Mart's, despite the latter's recent price reductions to undercut rival Target, according to a note published Sunday by Goldman Sachs.
The same held true for electronics, Goldman Sachs found, with Amazon's prices 10 percent below the average retail price, compared to 4 percent below at Wal-Mart.
Amazon shares were down $4.72 to $160.96 in late-morning trading on the Nasdaq.
(Reporting by Phil Wahba; additional reporting by Alexandria Sage in San Francisco; editing by John Wallace)
Credit: Reuters (http://www.reuters.com)
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