E-commerce company Chewy (NYSE: CHWY) focuses specifically on the pet food and pet care sector, while it wants to Amazon (NASDAQ: AMZN), which is just one of countless divisions and lines of business. But within that space, the two are fighting fiercely for sales and dominance.
So which one is best for investors to buy today?
Store everything
Amazon hardly needs an introduction – it is the global leader in e-commerce and cloud computing by a wide margin. And both of those markets are beyond big.
For example, the global retail market is estimated to be worth $ 25 trillion. The global public cloud computing market is expected to exceed $ 330 billion this year. And Andy Jassey, Amazon’s Head of Web Services (AWS), is also aiming to push AWS into the $ 3.7 trillion enterprise IT market. With Amazon having $ 348 billion in net sales over the past 12 months, it ‘s clear that it has a lot more room to grow.
Image source: Amazon.
And as we all know, the COVID-19 pandemic has accelerated the growth of e-commerce. Now that more people have become accustomed to shopping online, including departments such as grocers that were previously more able to buy in person, it is likely to remain a habit for many of them. .
But the wildly beautiful card of Amazon’s business is its relentless innovative culture. The company is always investing in building new businesses that can be huge – which is just how it has grown from an online bookstore to a giant that is compete in too many markets to be listed here.
The pet specialist
While Amazon is an amazing business, Chewy certainly isn’t. This is a company that was only established nine years ago, and is already expected to generate over $ 7 billion in net sales this year. And it continues to grow net sales at over 40%. This rapid success is all the more impressive considering Amazon’s presence in the pet sector.
And Chewy has plenty of room to keep growing. Pet consumption in the U.S. was $ 95.7 billion in 2019 and is expected to reach $ 99.0 billion this year, according to the American Pet Products Association.
In addition, the proportion of pet sector consumption that has migrated online is still very low, but is expected to rise sharply. Six years ago, the online share of the sector was about 2%. Last year, it reached around 15%. And it is now expected to exceed 35% by 2024.
Chewy is also expanding into new segments of the pet market such as pet telehealthand combining pharmacy services. The executives have also suggested that they eventually roll out a range of online services, which could include things like market space for brides, walkers dogs and other service providers. That could be a lucrative new business for Chewy as there are a large number of regular customers who could use these services.
The better buy
Both Amazon and Chewy are great at what they do, but Amazon is the best buy.
Obviously, Amazon is the much bigger business – but that alone doesn’t make its investment better. And the key point is that it has much larger navigation markets with much more white space available to take advantage of.
No, the real difference here is the culture of Amazon innovation. A decade from now, Amazon is likely to have several additional major business lines that it doesn’t start with today. We can’t be sure for sure which ones they will be, but we can expect to pay at least one of the areas where the company is investing in a big way.
It may be the global logistics industry that it is investing heavily in. It could have been Amazon’s Pharmacy, which it was just recently. Amazon GO’s “just walk out” technology may be used by corporate retail stores, including supermarkets. It could be a self-driving robotaxi fleet, made possible by the recently started autonomous technology company Zoox.
Or Amazon’s biggest new business tomorrow could be one we don’t know about yet. The beauty of all this is that Amazon shares don’t seem to be getting the value of those big new revenue drivers that are still bouncing into the stock price, because it’s scarce that these industries even exist. That’s why Amazon shares could remain consistently undervalued while also appreciating nicely in the years to come. Investors should buy and hang this stock for ten years or more.