Transition To Digital Media Is A Major Risk For Amazon, eBay, et al

Morgan Stanley published a chart that illustrates those product categories brick and mortar stores are most at risk of losing to e-commerce companies:

The chart could also point out that some of these same categories are risks for e-commerce companies as well, given that many are starting to be delivered digitally through a number of different platforms. 

Amazon, for example, is very exposed to this shift.

Amazon has been impacted the most recently as its media division has hustled to participate in the shift toward digital delivery (Kindle, Amazon VOD being good examples).  Despite these efforts, however, the company still generates more than half of its overall revenue and profit from physical book, music, DVD, and game sales.  If Amazon can’t successfullly transition these sales to digital, half of its business could gradually disappear.

Those e-commerce companies that best adjust to the shift will show the best returns.  Here are some specific category examples:

  • Books: There are about six different e-readers either on the market or in development.  Even print publishers like Hearst and Time Inc. are developing e-readers.
  • Games: Console games are being challenged by online games, many of which are played on social networks, kicking e-commerce stores out of the equation.
  • Video: From streaming to downloading, online video is hurting DVD sales.  E-commerce companies will need to develop on-demand platforms like Amazon Video On Demand to compete.

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