‘If Amazon sells it, I’d be worried’

Staples Inc.’s US$6.3 billion takeover of Office Depot Inc. Wednesday is the latest example of brick and mortar retailers feeling the Internet squeeze. “This is a transformational acquisition which enables Staples to provide more value to customers,” Staples CEO Ron Sargent said in a statement. Meanwhile, RadioShack Corp. is reportedly exploring a bankruptcy deal that would close many of its stores outright and see Sprint Corp. and Amazon.com Inc. divvy up the rest. “If Amazon sells it, and you compete with them, I’d be worried,” Brian Yarbrough, an Edward Jones analyst, said in an interview. “Amazon’s probably been one of the most disruptive forces in retail.” Who’s next?

Bed Bath & Beyond Inc.

Jamie Katz, an analyst at Morningstar Inc., thinks Bed Bath & Beyond Inc. offers more breadth of merchandise. But this doesn’t mean its business is immune. “I think you see by the level of discounting that they’ve discussed over the last handful of quarters… they’re feeling threatened by other online competitors.” Ms. Katz thinks items like bedding or towels, which people like to handle before they purchase, are relatively secure, but other more commoditized products could come under pressure.

Mr. Yarbrough also pointed to the company’s huge store network as a potentially costly drawback. The retailer has over 1,000 stores in the U.S. and Canada.

Best Buy Co. Inc.

If RadioShack exits the picture, Best Buy Co. Inc. will be the last consumer electronics behemoth left standing.

Mr. Yarbrough expects Amazon and other low-cost online retailers to continue putting pressure on the Minnesotabased company.

“While they’ve got a new management team and they’ve put a lot of cost saving programs in,” he said, “I don’t think the pressure on consumer electronics is going to change any time soon.”

The electronics giant sent mixed messages last month, warning of an impending 2015 sales slump shortly after posting encouraging holiday numbers. Best Buy also closed 15 stores in Canada in 2013.

Di ck’s Sporting

Goods Inc.

According to Joseph Feldman, a senior research analyst at Telsey Advisory Group, the rapidly changing retail landscape may also take its toll on Dick’s Sporting Goods Inc.

“You could make the argument that you want to go and touch and feel some of the equipment like a baseball glove or a lacrosse stick,” he said in an interview, “but a soccer ball is kind of a soccer ball, a pair of cleats are a pair of cleats.” Mr. Feldman thinks falling sales for heavy fitness equipment may also hit the retailer’s bottom line.

Grocery stores

The American grocery market is a US$603 billion industry, according to Shawn Milne, a Janney Capital Markets analyst. Amazon launched its fresh food delivery service, AmazonFresh, in 2007, and has slowly expanded. AmazonFresh is available in Seattle, parts of California and New York City. While Amazon brought groceries to Canada in 2013, it has not yet released plans to bring its fresh selection north of the border. Mr. Yarbrough is confident Amazon will continue drawing business away from grocery stores for items such as canned goods, but he’s less convinced about fresh groceries.